Agreement No. 2 (2025) Modifying Article 3 of Agreement No. 3-2016 on Risk-Weighted Assets

Republic of Panama Banking Superintendence of Panama AGREEMENT No. 2-2025 (March 11, 2025)

"By which Article 3 of Agreement No. 3-2016, which establishes norms for the determination of risk-weighted assets for credit risk and counterparty risk, is modified."

THE BOARD OF DIRECTORS

in the exercise of its legal powers, and

CONSIDERING:

That following the issuance of Decree-Law No. 2 of February 22, 2008, the Executive Branch prepared a systematic arrangement 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 the provisions of paragraphs 1 and 2 of Article 5 of the Banking Law, the objectives of the Banking Superintendence are to ensure the maintenance of the solidity and efficiency of the banking system; as well as to strengthen and foster the favorable conditions for the development of the Republic of Panama as an international financial center;

That in accordance with paragraphs 3 and 5 of Article 11 of the Banking Law, it is the technical competence of the Board of Directors to approve the general criteria for the classification of risk assets and the guidelines for the constitution of reserves for risk coverage, and to fix, within the administrative scope, the interpretation and scope of legal or regulatory provisions in banking matters;

That in accordance with Article 70 of the Banking Law, every general license bank and international license bank whose origin supervisor is the Superintendence, must maintain capital funds equivalent to at least eight percent of the total of their assets and off-balance sheet operations that represent a contingency, weighted according to their risks, as well as primary capital equivalent to no less than four percent of their assets and off-balance sheet operations that represent a contingency, weighted according to their risks;

That through Agreement No. 3-2016 of March 22, 2016, and its modifications, norms are established for the determination of risk-weighted assets for credit risk and counterparty risk;

That Article 3 of Agreement No. 3-2016 establishes the international risk ratings of those rating agencies that banks must use as a reference for credit ratings;

That in working sessions of this Board of Directors, the need and convenience of modifying Article 3 of Agreement No. 3-2016 has been manifested, in order to include the international risk rating used by the rating agency, Kroll Bond Rating Agency, as a new reference for credit ratings for the purposes of Agreement No. 3-2016.

AGREES:

ARTICLE 1. Article 3 of Agreement No. 3-2016 of March 22, 2016, is hereby amended as follows:

"ARTICLE 3. INTERNATIONAL RATING. For the purposes of this Agreement, the international risk ratings with the nomenclature used by the rating agency Standard & Poor’s will be used as references.

The credit ratings of Standard & Poor’s will be used as a reference, as well as the ratings of Fitch, Moody’s, and Kroll Bond Rating Agency (KBRA) in accordance with the following table:

S&P	Fitch	Moody’s	Kroll Bond Rating Agency	Type
AAA	AAA	Aaa	AAA	Long Term
AA+	AA+	Aa1	AA+	Long Term
AA	AA	Aa2	AA	Long Term
AA-	AA-	Aa3	AA-	Long Term
A+	A+	A1	A+	Long Term
A	A	A2	A	Long Term
A-	A-	A3	A-	Long Term
BBB+	BBB+	Baa1	BBB+	Long Term
BBB	BBB	Baa2	BBB	Long Term
BBB-	BBB-	Baa3	BBB-	Long Term
BB+	BB+	Ba1	BB+	Long Term
BB	BB	Ba2	BB	Long Term
BB-	BB-	Ba3	BB-	Long Term
B+	B+	B1	B+	Long Term
B	B	B2	B	Long Term
B-	B-	B3	B-	Long Term
CCC+	CCC+	Caa1	CCC+	Long Term
CCC	CCC	Caa2	CCC	Long Term
CCC-	CCC-	Caa3	CCC-	Long Term
CC	CC	Ca	CC	Long Term
RD, D	RD, SD, D	C	D	Long Term
A-1+	F1+	P-1	K1+	Short Term
A-1	F1	K1		Short Term
A-2	F2	P-2	K2	Short Term
A-3	F3	P-3	K3	Short Term
B	B		B	Short Term
NP			C	Short Term
			D	Short Term
Not Rated	Not Rated	Not Rated	Not Rated	Not Rated

For the purposes of this Agreement, when there are two or more ratings issued by international rating agencies and different risk ratings are presented, the most conservative rating will be applied."

ARTICLE 2. EFFECTIVENESS. The provisions of this Agreement shall enter into force from the date of its promulgation.

Given in the city of Panama, on the eleventh (11) day of the month of March of two thousand twenty-five (2025).

NOTIFY, PUBLISH, AND COMPLY.

THE PRESIDENT, THE SECRETARY, Rafael Guardia Adriana Raquel Carles