The Panama Superintendence of Banks (SBP) establishes new rules applicable to Modified Credits.
The Board of Directors of the Panama Superintendence of Banks (SBP) approved Agreement No. 9-2020, through which Agreement No. 2-2020 “That establishes additional, exceptional and temporary measures for compliance with the provisions set forth in Agreement No. 4-2013 on credit risk ” is modified.
The purpose of this Agreement is to establish the rules that banks must apply for the treatment of modified credits as a result of the economic crisis caused by COVID-19 and the determination of their corresponding provisions, which protect the interest of depositors and preserve financial stability.
Through Agreement No. 9-2020, a new risk category called “Modified Special Mention” is created temporarily and exceptionally, in which banking entities must register the portfolio of credits that have been modified in accordance with the parameters established in Agreement No. 2-2020.
The banks must also establish those loans covered by the benefits of the Moratorium Law (Law No. 156 of 2020), in order to identify and segment the loan portfolio under said common characteristics, have knowledge of the current status of the same and establish the provisions and regulatory reserves that allow adequate risk management of said credits.
On the other hand, the constitution of a generic provision equivalent to 3% of the gross balance of the modified loan portfolio is established, which includes accrued interest not collected and capitalized expenses, applied in accordance with International Financial Reporting Standards (IFRS) and complementary to the prudential standards established in Agreement No. 9-2020.
Likewise, the rules are met to reestablish the conditions of the modified credits and under the Moratorium Law, once the period of validity of this Law has expired, that is, after December 31, 2020.
The provisions of Agreement No. 9-2020 entered into force as of September 21, 2020.