Obtain a banking license in Panama

Introduction

Panama assumes a pivotal function within the pecuniary framework of Latin America, capitalizing on an unparalleled locational advantage and sustaining a propitious domestic commercial milieu. The nation proffers a juridical infrastructure adhering to global benchmarks, thereby enabling fiduciary transactions to transpire with pronounced dependability. The enlisting of banking establishments in Panama persists as sought-after for sundry rationales. Foremost, this encompasses a congenial fiscal schema alongside steadfast enactments governing the operations of monetary entities. The polity is likewise characterized by its perspicuous stipulations for inaugurating banking institutions, rendering the process foreseeable for prospective stakeholders. The existence of a seasoned overseer in the guise of the Superintendencia de Bancos de Panamá ensures adherence to the statutes and exigencies of transnational jurisprudence.

The procedure of acquiring a financial institution's charter in Panama entails a multitude of phases. The pivotal aspects include furnishing an application, scrutinizing the details proffered by the oversight body, and adhering to the stipulations for the mandated equity. Upon receiving preliminary concurrence, examination directives must be fulfilled, and an operational blueprint must be proffered. Adherence to all protocols and observance of the prescriptions of the regulatory authority secures the procurement of a charter and the avenue to commence financial operations in Panama.

Banking licenses in the Republic of Panama

A general banking license, or General License, provides maximum opportunities for conducting banking activities in Panama. Holders of such a license can attract deposits from local residents and non-residents, provide lending, manage assets and perform other operations not only within the domestic market, but also outside it.

A comprehensive charter is more advantageous for transnational pecuniary conglomerates and prominent financial institutions. According to the Superintendencia de Bancos de Panamá, in 2024, approximately 30% of depositories enrolled in Panama possess precisely such a permit. It necessitates rigorous adherence to anti-money laundering and counter-terrorism financing protocols alongside periodic submissions to the oversight body. The stipulated minimum endowment capital is $10 million, underscoring the earnest aspirations and monetary fortitude of these enterprises.

International License is intended for financial institutions that focus on non-resident clients. Establishments holding this license are authorized to provide services to foreign companies and individuals, but cannot work directly with Panamanian residents. The main activities of such banks are asset management, attracting deposits from non-residents, international transfers, investment advice and providing loans outside state borders.

Banks with International License in Panama often act as a bridge between Latin America and other parts of the world, guaranteeing money transfers and supporting their clients' international transactions. The required minimum foundation fund is $3 million. Thus, an international license is more affordable than a general one, however, the reporting and compliance requirements for AML/CTF remain at a high level, which ensures trust from international partners.

Limited banking license, or Representation License involves significant restrictions compared to the previous two types. This license is issued to banks that plan to provide a limited range of services to certain categories of clients. Most often, such banks serve only related persons or companies belonging to the same financial group. An important feature is the lack of the right to accept deposits from a wide range of clients and provide standard lending services.

A limited license is suitable for specialized banking institutions that focus on asset management and financing their own projects. It is also used by holding structures that want to centralize the management of the financial flows of their subsidiaries. To obtain this license, a minimum authorized capital of $1 million. Representation License is less common, but remains relevant for organizations that need limited access to banking services for internal needs. A limited license can also serve as a starting point for those banks that in the future intend to expand their field of activity and switch to International License.

Legal aspects

To procure a charter for banking in Panama, a multitude of stringent statutory stipulations must be satisfied. These edicts pertain to both the quantum of pecuniary reserves and the credentials of overseers. Such provisions are devised to uphold the resilience of fiscal apparatuses and the assimilation of the nation into the global normative framework.

Regulatory framework

The operation of the monetary framework within the confines of Panama is regulated by the stipulations of the Ley Bancaria (Banking Law). This statute delineates the fundamental parameters for the accreditation, functionality, and dissolution of financial institutions, as well as expounds the methodology for oversight and disclosure. It encompasses pivotal elements such as organizational stewardship and AML/CTF scrutiny. The execution of this ordinance is delegated to the Panama Banking Authority (Superintendency of Banks of Panama) — the preeminent supervisory entity that monitors the efficacy of banking establishments.

The jurisprudence of the Isthmian Republic of Panama mandates fiscal institutions to uphold contingency pecuniary reserves, functioning as an underwriter of monetary steadfastness and attenuating hazards amid unanticipated predicaments. Fiscal establishments are likewise obligated to recurrently furnish yearly treatises to the overseer concerning the sufficiency of intrinsic capital, thereby enabling the Superintendencia to appraise the steadfastness of their operations.

To corroborate the subsistence of sanctioned pecuniary resources, the petitioner must furnish documentation substantiating the lodgment of assets within a fiduciary establishment in Panama. The Superintendencia scrutinizes the propriety of the provenance of these assets, mandating exhaustive ledgers and fiscal declarations. Such meticulous examination facilitates the ascertainment that the resources are unassociated with nefarious enterprises, including financial laundering.

Requirements for founders and managers

The Panamanian Banking Directorate (Superintendency of Banks of Panama) establishes elevated stipulations for the vocational credentials of financiers and overseers. Board affiliates must adhere to the Fit and Proper axiom, denoting proficiency in the financial domain, analytical acumen, and peril oversight. Upper-echelon designations like Chief Executive Officer or Finance Overseer necessitate a bare minimum of quinquennial expertise in analogous spheres.

The Superintendencia meticulously scrutinizes the mercantile repute of the progenitors, encompassing their commercial and pecuniary chronicles. This incorporates deliberation of the existence or nonexistence of a felonious dossier, engagement in insolvencies, and affiliations with fiscal debacles. Such vigilance precludes the establishment of banking institutions by individuals with equivocal antecedents, thereby mitigating the perils of mismanagement.

Criteria Suitability and Decency also encompass candidates' intrinsic attributes, such as morality and equitable commercial practices. If the Superintendencia detects transgressions or non-adherence to norms, the overseer possesses the prerogative to decline licensure or mandate the substitution of particular managerial members until the culmination of the licensing procedure.

Procedure and documentation

Submitting an application

To procure a financial charter in Panama, the petitioner is mandated to present the requisite compilation of credentials to the Superintendency of Banks of Panama. It must substantiate the juridical standing of the corporation, its fiscal fortitude, and the commercial esteem of the progenitors.

The list of main documents includes:

The business plan is a key document; on its basis, the regulator evaluates the prospects for the new bank’s activities. It describes in detail:

• Financial schema: Prognosis (revenue/expenditures) for the inaugural quinquennium of operation, dissection of lucrativeness and solvency, schemes for augmenting capital and peril mitigation.
• Anticipated provisions: An exhaustive register of fiscal commodities that the establishment aspires to tender, encompassing depository and crediting provisions, dealings, etc.
• Governance framework: Exposition of the organizational configuration, duties of senior executives.

The procedure for scrutinizing the application entails a succession of methodical phases. Preliminary examination of documentation spans 30-60 days, subsequent to which the applicant might be solicited for supplementary particulars. An exhaustive evaluation of the application and a resolution typically require 6-12 months, contingent on the intricacy of the applicant’s commercial framework and configuration. Throughout this interval, the applicant engages in a vigorous discourse with the regulatory body to expeditiously ascertain that all requisite data is supplied.

Consideration of the application

Procedure for considering an application for extradition banking license in Panama involves a multicomponent study of documents.

Upon successful completion of these steps, the applicant may be issued pre-approval or In-Principle Approval. This is an intermediate status that allows the bank to prepare to begin operating activities, subject to a number of additional requirements. Such requirements may include providing minimum capital guarantees, entering into agreements with international correspondent banks, or completing internal audit procedures.

If the regulator identifies inconsistencies in the documentation or insufficient qualifications of the founders, a license may be refused. Main reasons for refusal include:

• Lack of evidence of sources of capital.
• Incomplete or unreliable financial data.
• Failure of founders and managers to meet the Fit and Proper criteria.
• Violations in the proposed internal controls and AML procedures.

Refusal of a license is not final: the company has the right to submit a new application after eliminating the comments.

Economic and legal aspects

The corporate tax rate in the country is set at 25% of net profit. However, Panama's unique fiscal regime, based on the principle of territoriality, assumes that income received from activities abroad is free from taxes. This allows banks that focus on the global market to optimize fiscal burdens and increase their profitability.

Transfer Tax on Movable Property and Services (Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios or ITBMS) - Panamanian Value Added Tax (VAT) is currently 7%.

Flaws banking license in Panama

Panama banking license has its own characteristics that make it attractive to international investors. At the same time, there are a number of risks and restrictions that need to be taken into account when choosing this jurisdiction. Let's look at the main disadvantages obtaining a banking license in Panama.

Despite the Republic of Panama's efforts to exit the FATF gray list, the country continues to face international pressure over financial transparency. In particular, G20 countries are actively promoting initiatives to increase the transparency of offshore zones, which may affect Panama's reputation as a financial center. For banks, this means strictly complying with AML standards and providing detailed reports to avoid penalties and loss of correspondent relationships with international banks.

Availability banking license in Panama does not always guarantee access to correspondent accounts in large international banks. In recent years, some US and European banks have tightened their requirements for cooperation with Panamanian financial institutions, especially with regard to customer due diligence and transaction monitoring. This requires banks in Panama additional investments in technology for transaction tracking and risk analysis, which may increase operating costs. Lack of access to international settlement systems may limit the ability of banks to provide cross-border transfer and financing services.

Prospects for the development of the banking sector in Panama

The Panamanian financial domain persists as a pivotal constituent of the nation's fiscal infrastructure, notwithstanding the tribulations encountered in recent annals. As 2024 unfolds, prognostications and extant trajectories indicate consistent proliferation, vigorous recalibration of the statutory substratum, and ameliorated circumstances for the allure of extrinsic capitalists. Within this segment, we shall contemplate the predominant inclinations, prospective alterations in governance, and advisories for individuals contemplating the execution of financial enterprises in Panama.

Analysis of current trends and forecasts for the financial sector

In 2024, the Panamanian financial sphere is exhibiting indicators of a vigorous resurgence from worldwide economic disarray and the pandemic. The nation's Gross Domestic Product expansion is anticipated to reach 4%, surpassing the Latin American mean. This engenders auspicious circumstances for the amplification of credit and a surge in the magnitude of dealings with global clientele. As per the Superintendence of Banks of Panama, in 2023, assets within the Panamanian banking realm surpassed US$135 billion, which substantiates the nation's prominence as a provincial fiscal nexus.

One of the principal tendencies in 2024 is the vigorous deployment of digital technologies and the expansion of the fintech domain. Financial institutions in Panama are zealously committing resources to the digitization of services, encompassing virtual banking, mobile interfaces, and the utilization of blockchain mechanisms to streamline transactions. This augments the calibre of service and curtails transactional expenditures, which is particularly crucial amidst the intensifying rivalry from fintech enterprises. By 2025, the quantum of digital dealings is anticipated to burgeon by 15-20% relative to the preceding annum.

Expected changes in regulation and their impact on the investment climate

In 2024, Panama persists in ardently conforming its statutes to global paradigms. This pertains both to augmenting anti-money laundering (AML) provisions and ameliorating circumstances for financial institutions functioning within the transnational sphere. The promulgation of novel regulatory criteria is intended to guarantee the lucidity of transactions and fortify trust from foreign capitalists.

One of the anticipated alterations is the intensification of transaction documentation stipulations, which is linked to advisories of the Financial Action Task Force (FATF). Specifically, it is projected to institute obligatory digital data interchange with global entities to scrutinize dubious transactions and avert fiscal malfeasance. This will amplify the bureaucratic encumbrance on financial institutions, but in the protracted run, will fortify trust in the monetary infrastructure of Panama.

Conversely, the Panamanian administration intends to augment privileges for financial establishments functioning within distinct economic enclaves. In 2025, fiscal reprieves for nascent entities within the enclave could be prolonged to Panama Pacific, thereby enabling financial institutions to diminish operational expenditures during the initial phases of their enterprise. This shall engender supplementary inducements for inaugurating new financial establishments and broadening the foothold of global fiscal conglomerates.

Recommendations for potential investors

For those contemplating the establishment of a financial institution in Panama, it is paramount to consider the peculiarities of indigenous regulation and prevailing market inclinations. The groundwork for accreditation and efficacious collaboration with the overseer may substantially influence the triumph of forthcoming endeavors.

When composing records for an authorization, particular heed ought to be bestowed upon the commercial schema. The Superintendencia de Bancos demands that the pecuniary paradigm be plausible and incorporate exhaustive prognostications for 3-5 annums. It is pivotal to unambiguously delineate the intended clientele and how to attenuate fiduciary hazards.

It is prudent to prearrange collaboration with indigenous examiners and legal practitioners, possessing expertise with the Superintendencia de Bancos. This will aid in evading blunders in the compilation of paperwork and streamline the procedure of engagement with the overseer.

As Panama fervently aligns with global norms in the battle against fiscal malfeasance, stakeholders ought to heed the establishment of a robust internal governance framework and AML/CTF protocols. The overseer accords especial gravity to adherence to FATF criteria, and a proficient transaction oversight mechanism will facilitate the circumvention of complications amid audits.

It is likewise advisable to formulate beforehand a reputational jeopardy administration scheme. Panama, notwithstanding endeavors to ameliorate its standing, continues to grapple with predicaments arising from the nation’s historical utilization as an extraterritorial hub. Collaborations with global legal establishments and advisory firms shall bolster reliance from prospective patrons and global allies.

Evaluating perils concomitant with alterations in statutory provisions: It is paramount to take into account that augmented scrutiny over pecuniary dealings may necessitate supplementary capital infusion in surveillance and documentation apparatus. Consequently, it is advisable to earmark resources within the financial plan for the instatement of mechanized transaction scrutiny systems, which shall alleviate the encumbrance on personnel and expedite the computation of data.

Conclusion

Panama is diligently aligning its statutes with global benchmarks, thereby bolstering trust from overseas collaborators. The enactment of FATF suggestions and the fortification of anti-money laundering provisions render the Panamanian financial sector more lucid and safeguarded. This holds particular significance for banking establishments aspiring to forge correspondent ties with prominent monetary entities in the United States and European Union. Concurrently, while preserving adaptability in internal governance, Panama upholds the latitude to present unparalleled circumstances for conducting commerce within its free economic zones, such as Panama Pacific, thereby facilitating the allure of novel participants to the market.

Nonetheless, the prosperous acquisition and ensuing preservation of a banking license in Panama necessitates rigorous adherence to stipulated criteria. The Superintendencia de Bancos de Panamá imposes exacting requisites on the fiscal integrity of banks, their internal oversight mechanisms, and the lucidity of their reports. It is insufficient to merely amass the requisite paperwork and satisfy the capital thresholds – it is imperative to exhibit a coherent developmental strategy grounded in a resilient risk governance framework. As per statistical data, banks that accord paramount importance to adherence to AML/CTF protocols are markedly less prone to face difficulties in dealings with the regulatory authority.