Agreement No. 003-2020 Modifying Article 3 of Agreement No. 2-2020 on Credit Risk

Republic of Panama Superintendence of Banks AGREEMENT No. 003-2020 (March 26, 2020)

"Modifying numeral 7 of article 3 of Agreement No. 2-2020 through which additional exceptional and temporary measures are established for compliance with the provisions contained in Agreement No. 4-2013 on credit risk"

THE BOARD OF DIRECTORS

In exercise of its legal powers, and

CONSIDERING:

That as a result of the issuance of Decree-Law No. 2 of February 22, 2008, the Executive Branch prepared a systematic ordering in the form of a single text of Decree-Law No. 9 of February 26, 1998, and all its modifications, which was approved through Executive Decree No. 52 of April 30, 2008, hereinafter the Banking Law;

That in accordance with numerals 1 and 3 of article 5 of the Banking Law, the objectives of the Superintendence of Banks are to ensure the solidity and efficiency of the banking system; as well as to promote public confidence in the banking system;

That numeral 5 of article 11 of the Banking Law provides, within the technical attributions of the Board of Directors, the power to fix, in the administrative sphere, the interpretation and scope of legal or regulatory provisions in banking matters;

That through Agreement No. 4-2013 of May 28, 2013, provisions on the management and administration of credit risk inherent to the credit portfolio and off-balance sheet operations are established;

That as a result of the Coronavirus outbreak, worldwide, and in follow-up to the international recommendations of the World Health Organization and the Pan American Health Organization, the National Government through the Ministry of Health issued Executive Decree No. 64 of January 28, 2020, which adopts necessary measures that are indispensable and urgent, contained in the National Plan against the threat of an outbreak of the new Coronavirus; as well as extraordinary measures that are necessary to prevent the introduction and spread of this public health problem;

That in the face of the threat of an emergency situation in the territory due to the risk of spread of the coronavirus outbreak, the Cabinet Council through Cabinet Resolution No. 6 of January 28, 2020, declares the threat of high risk of spread of the New Coronavirus (2019-nCoV) outbreak in the national territory;

That subsequently, in order to expand Cabinet Resolution No. 6 of 2020 and double the surveillance measures to contain the epidemic and expand, the Cabinet Council through Cabinet Resolution No. 10 of March 3, 2020, elevates the threat of spread of the New Coronavirus (2019-nCoV) outbreak in the national territory to very high and issues other provisions;

That this health threat situation of the New Coronavirus (2019-nCoV) at the global level has collateraly affected different sectors of the economy, among which the financial sector is included, so it is necessary to protect the financial stability of the Panamanian banking system;

That the Superintendence of Banks issued Agreement No. 2-2020 which establishes additional, exceptional, and temporary measures for compliance with the provisions contained in Agreement No. 4-2013, which allows banks to modify the originally agreed conditions of corporate and consumer loans, in order to provide economic relief to clients whose payment capacity is affected by the situation caused by COVID-19;

That article 3 numeral 7 of Agreement No. 2-2020 establishes that the modification date shall be considered that on which the Agreement was formalized in which the new conditions are recorded;

That in working sessions of this Board of Directors, the need and convenience of modifying the aforementioned numeral 7 of article 3 has been brought to light, in order to clarify and flex aspects related to the formalization of the modifications.

RESOLVES:

ARTICLE 1. Numeral 7 of article 3 of Agreement No. 2-2020 of March 16, 2020, is hereby amended as follows:

"ARTICLE 3. RULES RELATING TO MODIFIED CREDITS. The modifications of credits as provided in this Agreement must not become a generalized practice to regularize the behavior of the credit portfolio. Additionally, banking entities must ensure that the following rules are applied:

1. ……
2. ……
3. ……
4. ……
5. ……
6. ……
7. The modification date shall be considered that on which the debtor has accepted the modifications by any means or modality (including, without implying any limitation, electronic means, tacit acceptance, presumed acceptance by silence, etc.) and, from that date, the bank may consider the loan as a modified credit for the purposes of this Agreement and Agreement No. 4-2013."

ARTICLE 2. VALIDITY. This Agreement shall enter into force from its promulgation.

Given in the city of Panama, on the twenty-sixth (26) day of the month of March of two thousand twenty (2020).

NOTIFY, PUBLISH, AND COMPLY.

THE PRESIDENT THE SECRETARY Joseph Fidanque III Nicolás Ardito Barletta