Agreement No. 6 (2025) Modifying Articles 7, 8 and Annexes 1 and 2 of Agreement No. 4-2008 on Legal Liquidity Index Compliance

Republic of Panama
Banking Superintendence of Panama
AGREEMENT No. 6-2025
(July 15, 2025)
"By which Articles 7, 8 and Annexes 1 and 2 of Agreement No. 4-2008, which establishes new provisions for compliance with the legal liquidity index, are modified"

THE BOARD OF DIRECTORS in the exercise of its legal powers, and

CONSIDERING:

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

That in accordance with items 1 and 2 of Article 5 of the Banking Law, it is the objective of the Banking Superintendence to ensure the maintenance of the solidity and efficiency of the banking system, as well as to strengthen and foster the conditions conducive to the development of the Republic of Panama as an international financial center;

That in accordance with Article 11, section I, item 5 of the Banking Law, it is a technical attribute of this Board of Directors to establish, within the administrative scope, the interpretation and scope of legal or regulatory provisions in banking matters;

That in accordance with Article 73 of the Banking Law, every bank with a general license and every bank with an international license whose origin supervisor is the Banking Superintendence must maintain at all times a minimum balance of liquid assets equivalent to the percentage of the total gross of its deposits in Panama, which will be periodically fixed by this Superintendence;

That in accordance with item 6 of Article 75 of the Banking Law, obligations issued by foreign governments or by international financial organisms authorized by the Superintendence, which are actively traded in securities markets, shall be considered as liquid assets, provided they are free of any encumbrance or lien and are freely transferable, in accordance with the weighting criteria developed by the Superintendence for these purposes;

That in accordance with item 7 of Article 75 of the Banking Law, obligations of national or foreign private companies approved by this Superintendence, which are actively traded in the securities market and have investment grade quality as determined by a recognized international risk rating agency, shall be considered as liquid assets, provided they are free of any encumbrance or lien and are freely transferable, according to their market value;

That by Agreement No. 4-2008 of July 24, 2008, and its modifications, this Superintendence issued new provisions for compliance with the legal liquidity index;

That Article 7 of Agreement No. 4-2008 establishes that for the purposes of item 6 of Article 75 of the Banking Law, obligations issued by multilateral financial organisms of which the Republic of Panama is a member are accepted as liquid assets;

That Article 8 of Agreement No. 4-2008 establishes that for the purposes of item 7 of Article 75 of the Banking Law, titles guaranteed by residential mortgage loans, issued by foreign private and government agencies whose long-term international rating is not lower than AAA/Aaa, which allow the investor to receive a pro-rata participation of all cash flows generated by a package of mortgages, are accepted as liquid assets; as well as the conditions that such titles must meet;

That Annexes 1 and 2 establish the international risk ratings of those rating agencies that banks must use for the purposes of Agreement No. 4-2008;

That in working sessions of this Board of Directors, the need and convenience of modifying provisions of Agreement No. 4-2008 regarding the legal liquidity index has been highlighted.

AGREES:

ARTICLE 1. Article 7 of Agreement No. 4-2008 of July 24, 2008, is hereby amended as follows:

ARTICLE 7. OBLIGATIONS ISSUED BY INTERNATIONAL FINANCIAL ORGANISMS. For the purposes of item 6 of Article 75 of the Banking Law, the following are accepted as liquid assets:

1. Negotiable securities that represent credits against, or are guaranteed by, the Bank for International Settlements, the European Central Bank, the European Community, and the International Monetary Fund (IMF).

2. Negotiable securities issued by the following multilateral financial organisms: The International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Inter-American Development Bank (IDB), the European Investment Bank (EIB), the Asian Development Bank (ADB), the African Development Bank (AfDB), the International Fund for Agricultural Development (IFAD), the Andean Development Corporation (CAF), the European Bank for Reconstruction and Development (EBRD), the Council of Europe Development Bank (CEB); and other multilateral financial organisms of which the Republic of Panama is a member. These shall be admitted at their market value, weighted according to their international risk rating scale, as indicated below:

International Rating Weighting
AAA to AA- 100%
A+ to A- 85%

All instruments included in these two categories must be subject to quotations and real transactions in active secondary markets, with a low level of concentration of operations.

ARTICLE 2. Article 8 of Agreement No. 4-2008 of July 24, 2008, is hereby amended as follows:

ARTICLE 8. OBLIGATIONS ISSUED BY FOREIGN PRIVATE AND GOVERNMENT AGENCIES. For the purposes of item 7 of Article 75 of the Banking Law, titles guaranteed by residential mortgage loans, issued by foreign private and government agencies whose long-term international rating is not lower than AA/Aa2, which allow the investor to receive a pro-rata participation of all cash flows generated by a package of mortgages, are accepted as liquid assets.

The titles shall be considered at their market value and weighted, according to their international risk rating scale, in accordance with the following table:

Rating Weighting
AAA 100%
AA+ to AA 75%

The titles must meet the following conditions:

a. Have a long-term international risk rating not lower than AA/Aa2 or a short-term rating not lower than A-1/P-1 or their equivalents; b. Be payable in United States dollars or in another currency of free convertibility and transferability, at the discretion of the Superintendence;
c. Be subject to frequent quotations and real transactions in an organized secondary securities market or in repo markets. The bank must maintain evidence of the quotations and transactions with the objective of proving that they effectively possess the essential characteristic of being liquid.
d. The basket of underlying assets is limited solely to mortgages for the purchase of homes, i.e., residential mortgage-backed securities (RMBS), and does not contain structured products.

PARAGRAPH. For the purposes of what is established in this article, no more than 30% of the minimum legal liquidity index may consist of these assets.
The percentage referred to in this paragraph shall be reviewed semi-annually by the Superintendent of Banks in the months of January and July of each year. Variations to the established percentage will be announced through a General Resolution of the Superintendent.

ARTICLE 3. Annexes 1 and 2 of Agreement No. 4-2008 of July 24, 2008, are hereby amended as follows:

ANNEX 1
LONG-TERM INVESTMENT GRADE RATINGS
LONG-TERM NON-INVESTMENT GRADE RATINGS

ANNEX 2
SHORT-TERM INVESTMENT GRADE RATINGS
MOODY'S P-1 P-2 P-3
STANDARD & POOR'S A-1+ A-1 A-2 A-3
FITCH F1+ F1 F2 F3
KROLL BOND RATING AGENCY K1+ K1 K2 K3

SHORT-TERM NON-INVESTMENT GRADE RATINGS
MOODY'S NP
STANDARD & POOR'S B C D
FITCH B C D
KROLL BOND RATING AGENCY B C D

LONG-TERM INVESTMENT GRADE RATINGS
MOODY'S Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 STANDARD & POOR'S AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- FITCH AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- KROLL BOND RATING AGENCY AAA AA+ AA AA- A+ A A- BBB+ BBB BBB-

LONG-TERM NON-INVESTMENT GRADE RATINGS
MOODY'S Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca C STANDARD & POOR'S BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C RD, D FITCH BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C RD, SD, D KROLL BOND RATING AGENCY BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C D

ARTICLE 4. EFFECTIVENESS. This Agreement shall enter into force from its promulgation.

Given in the city of Panama, on the fifteenth (15) day of the month of July of two thousand twenty-five (2025).

LET IT BE COMMUNICATED, PUBLISHED, AND COMPLIED WITH.

THE AD-HOC PRESIDENT, THE AD-HOC SECRETARY,
Adriana Raquel Carles María de Lourdes Marengo