SBP dictates temporary measures to modify credit terms and conditions due to the COVID-19 outbreak

In order to preserve the stability of the financial system, the Superintendency of Banks of Panama (SBP), adopted measures to mitigate any potential deterioration that impacts the situation of the national banking system derived from the spread of COVID-19.

The actions taken by the regulator allow banks to have the necessary mechanisms to support their personal banking clients as well as commercial and corporate clients in the face of the current public health situation.

These measures are expected to provide economic relief to this
unprecedented situation:

  • A modality called “modified loans” was established, so that clients receive the option to adjust the payment of their obligations and mitigate a possible deterioration of their credit.
  • Banks will be able to review the terms and conditions of the loans, which will allow them to agree and grant grace periods, maintaining the credit classification at the time this provision comes into force.
  • The adjustments will be made based on the reality of each debtor who has been affected by the Covid-19 and those who show arrears of payments of up to 90 days.
  • Modifications may be made at the request of clients or at the direct initiative of the banks themselves.
  • The loans to be modified will be exempt from the application of commissions, as well as from the revaluation of the loans.
  • Banks have an initial period of 120 days to carry out the evaluations of their clients.
  • On the other hand, banks will be allowed to make use of the dynamic provision, which is a tool called “anticyclical buffer”, that is part of the assets of each bank established during times of high economic growth, with the purpose of being used in the moments where there is a slower rate of economic growth, such as the current situation.
  • This should translate into less pressure on banks, allowing them to improve their position and willingness to grant loans that improve the banks’ balance sheets.