Member Articles

Rule 2-2020, as amended by Rule 3-2020 of the Superintendency of Banks of Panama (hereinafter, “SBP,” for its initials in Spanish).

On March 16, 2020, the SBP issued Rule 2-2020, which was subsequently amended by Rule 3-2020 (here in after referred to as “Rule 2-2020") and "establishes additional, exceptional and temporary measures for compliance with the provisions contained in Rule 4-2013 on credit risk".”.

Rule 2-2020 creates a new category of credits named "modified credits" and it allows banks, in agreement with their debtors, to modify the conditions originally agreed without this being considered a "restructured credit."

Relevant topics for the purposes of this agreement are:

• These credits must: (i) meet financial viability criteria through their new terms and conditions, taking into account the debtor's ability to pay and the bank's credit policies; (ii) be subject to special monitoring by the bank; and (iii) be recognized as restructured, if debtors fail to comply with the modified terms and conditions;
• loans classified as normal and special mention, as well as restructured credits that are not in arrears payment, may be modified;
• contracts that are modified must be identified for special monitoring by the SBP;
• during the duration of exceptional and temporary measures, for purposes of negotiating specific terms and interest rates, banks shall take into account the current situation facing the country;
• the modification of the credits is exempt from charges and fees by the bank except for legal, notary and registration expenses paid to third parties;
• modification of the loans shall be exempt from the requirement to update the appraisal;
• the bank shall establish specific policies and procedures for the management and monitoring of requests to change the conditions of these credits;
• the date of modification shall be the date on which the debtor has accepted the modifications by any means or modality (including electronic means, tacit acceptance, presumed acceptance by silence, etc.); and
• As an exceptional and temporary measure, banks will be able to use up to 80% of the dynamic provision for the establishment of specific provisions. To use more than 80%, banks must obtain authorization from the SBP. Banks may only pay dividends once they have refunded the amount of the dynamic provision that corresponds to them according to their credit portfolio.

Circular No. SBP-DR- 0118-2020 of April 8, 2020.

The SBP issued the circular to:

• Request banks to ensure that they do not charge interest on interest, moratorium interest, or interest capitalization on loans that have been modified under Rule 2-2020;
• Reiterate that modified credits are exempt from the application of commissions and charges, except for legal, notary and registration expenses which are to be paid to third parties; and
• Urge financial institutions to administer the interest rate applicable to modified credits so as not to impair, as far as possible, the financial situation of customers.

Official Statement on the Moratorium Extension Agreement until December 2020 issued by the Panama Banking Association (hereinafter, “ABP”).

On May 4, 2020, the ABP issued the official statement on the moratorium extension understanding (here in after referred to as the "Commitment Understanding") until December 2020, in which the ABP announces the extension and incorporation of new financial relief measures to support their customers affected by COVID-19.

The Commitment Understanding establishes that:

• The benefits granted under the Commitment Understanding are for "persons who have had their employment contract suspended or terminated, the self-employed and commercial workers, whose activity has been affected by the health measures established by the Executive Branch" and is mainly to extend the moratorium until December 2020;
• The Commitment Understanding applies to residential mortgage loans, personal loans, car loans, credit cards, small and medium-sized enterprises loans, commercial loans, transport and agricultural loans, and
• It is expressly established that during the remainder of 2020, banks' commitment continues not to foreclose on existing residential mortgages.

For any additional information, please contact:

Kharla Aizpurúa O.

MORGAN & MORGAN

Tel: 265-7777 ext. 7652

Email: [email protected]