Agreement No. 007-2022 Modifying Article 41 of Agreement No. 4-2013

Republic of Panama
Banking Superintendence
AGREEMENT No. 007-2022
(August 2, 2022)
"Modifying numeral 1, letter d of Article 41 of Agreement No. 4-2013"

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 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 what is established in numerales 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 conformity with numerales 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 through Agreement No. 4-2013 of May 28, 2013, and its modifications, norms are established regarding the management and administration of credit risk inherent to the credit portfolio and off-balance sheet operations;

That through Article 41 of Agreement No. 4-2013, the valuation of the various eligible guarantees as credit risk mitigants is established;

That numeral 1, letter d of Article 41 of Agreement No. 4-2013 establishes that mortgage guarantees on commercial real estate properties shall be subject to everything established in letters b, c, and d. However, the appraisal must be renewed at least every 3 years;

That in working sessions of this Board of Directors, the need and convenience to modify numeral 1, letter d of Article 41 of Agreement No. 4-2013 has been brought to light.

AGREES:

ARTICLE 1. MODIFICATION. Numeral 1, letter d of Article 41 of Agreement No. 4-2013, is hereby amended as follows:

"ARTICLE 41. VALUATION OF GUARANTEES. On the date that banking entities carry out the valuation of assets given as collateral as risk mitigants, they must take as a base the predominant values in the market. The entities granting the financing must use a strictly conservative criterion (the lowest value reflected in the appraisal report), in the sense of calculating the liquidation value that would be obtained by alienating said assets. Such valuation must be carried out according to the type of asset in question, as described below:

1. Mortgage guarantee on real estate properties.
   … d. For the purposes of commercial real estate properties, everything established in letters b, c, and d shall apply. However, the appraisal must be renewed at least every 5 years.
   …"

ARTICLE 2. EFFECTIVENESS. The provisions of this Agreement shall begin to govern from the date of its promulgation.

Given in the city of Panama, on the second (2) day of the month of August of two thousand twenty-two (2022).

NOTIFY, PUBLISH, AND COMPLY.

THE PRESIDENT THE SECRETARY

Rafael Guardia Pérez Felipe Echandi Lacayo