Panama Banking Law - Business

By : sverdlow
Panama Banking Law
The Panama banking legal structure has some excellent features for an offshore banking jurisdiction and tax haven which Panama certainly is in addition to being a retirement haven. Our law firm will discuss some of these points of law to help a prospective investor better understand the workings of the Panama Banking System.

Panama Superintend of Banks
This position was created when Panama revised its banking laws for the betterment of Panama as an offshore tax haven. The position is a judicial personage and was created to be independent of the other components of the Panama Government. The Superintend of Banks was enabled to have its own separate funds from the central government and is allowed to administer its own agent autonomously from the rest of the government. The Superintend of Banks is responsible to the Panama Constitution, Banking Laws and the General Comptroller of Panama. It is relatively free of interference by other parts of the Panama Government.

Panama Superintend of Banks Responsibilities
They are as follows: Issuing the licenses to banks operating inside of Panama, regulating the banking sector of Panama which includes other non-bank regulated financial businesses, the right to do a bank reorganization, liquidation or in some way restrict, supervise or control the operation of a bank in distress, give approval to banks merging together or acquiring other banks in Panama, and in general controlling itself and the banks and other licensed entities under its supervision. Since the Americans left on 12/31/1999 there has been one bank failure in Panama and the troubles would have begun before 2000.

Panama Banking Licenses
The following describes the different types of banking licenses available in Panama.

Panama General Banking License
This license requires a $10,000,000 paid in capital (think cash deposit with the Government of Panama) and is a full banking license enabling to bank to have both onshore and offshore clients.

Panama International Banking License
This license requires a $3,000,000 cash deposit with the government of Panama. This license could be referred to as an offshore banking license and only enables the bank to conduct its activities with offshore entities although the bank itself is in Panama. It can not do business with Panama Corporation, Panama Foundations and Panama residents or citizens.

Panama Foreign Representation License
This is a license enabling a foreign bank to operate in Panama. They must have the permission of the banking authorities from their home country. This has a $10,000,000 paid in capital requirement which may not need to be kept inside of Panama.

Panama Bank Legal Prohibitions
Licensed Panama banks can not do any of the following:

* Panama Banks may only make payments or dividends through shares after having complied with any and all requirements for minimum capital and have reserve levels met for amortized or delayed expense accounting entries.
* Panama Banks can not loan to any one entity be that a judicial or natural personage, any line of credit greater than 5% of the total deposits and capital of the bank.
* Panama Banks can not lend in an unsecured way and loans or lines of credit exceeding 15% of their capital. Or exceeding 25% of their capital in regards to secured loans, to any of the banks directors, or to a judicial entity where one of the directors is an officer of the lending bank or a director of the lending bank. The same applies to banks managers, officers, employees and their spouses with the exception being secured real estate loans for a personal residence.

Smythe Bradley is an expat living in The Republic of Panama. He has published many articles on offshore asset protection in panama, panama visas and residency, as well as many other expat issues.