Agreement No. 009-2022: Adding Article 11-A to Agreement No. 1-2011 on Transparency of Information for the Use of Banking Products and Services

Republic of Panama Banking Superintendence AGREEMENT No. 009-2022 (August 16, 2022)

"Adding Article 11-A to Agreement No. 1-2011 on Transparency of Information for the Use of Banking Products and Services"

THE BOARD OF DIRECTORS

in the 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 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 numerals 3 and 4 of Article 5 of the Banking Law, it is the objective of the Banking Superintendence to promote public confidence in the banking system and to ensure legal balance between the banking system and its clients;

That in accordance with numeral 5 of Article 11 of the Banking Law, it is an attribute of a technical nature of the 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 192 of the Banking Law, banks are obligated to provide services to banking clients with transparency, probity, and equity;

That through Agreement No. 1-2011 of January 4, 2011, guidelines were issued for the transparency of information regarding the use of banking products and services;

That through Agreement No. 4-2011 of May 4, 2011, rules were issued for the charging of certain commissions and surcharges by banking entities;

That in accordance with Article 11 of Agreement No. 4-2011, it is considered an abusive practice by banking entities, and therefore cannot be included in banking contracts or applied in relations with clients, the conditioning of the client by the bank to agree to choose or designate insurance companies related to the bank or the banking group, in those transactions where the contracting of any type of insurance is required;

That Law No. 12 of April 3, 2012 regulates the insurance activity and establishes other provisions;

That in accordance with Articles 150 and 151 of Law No. 12 of 2012, bank clients have the freedom to contract insurance directly with insurers or through insurance brokers, the marketing channels authorized by law in transactions where the contracting of any type of insurance is required, as well as to opt to join collective insurance plans that the bank has in force;

That the Superintendence of Insurance and Reinsurance of Panama has communicated to the Banking Superintendence its concern that the statistics recorded by said institution reflect an increase in claims presented by consumers regarding the limitation of the right to choose the insurance entity and insurance broker of their preference when carrying out a transaction with a banking entity;

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That the Banking Superintendence, through multiple circulars, has reiterated to banking entities the need to safeguard the right of banking clients to choose their preferred insurance company in those operations that require it; and has warned about the prohibition of conditioning said client right in the provision of banking products and services;

That statistical analyses of the information managed by the Banking Superintendence, through the Banking Customer Service Management, reveal that not all banking entities are complying with the right and freedom that the client has to choose the insurance company in banking operations that require it;

That in working sessions of this Board of Directors, the need and convenience of modifying Agreement No. 1-2011 has been manifested, in order to establish the obligation of banks to inform clients, and at the same time, recognize and accept the freedom that every person has to contract insurance in those banking operations that require it, either by adhering to a collective insurance or contracting an individual insurance, as well as complying with the right to information related to the insurance contracts that back up said obligations.

AGREES:

ARTICLE 1. Article 9 of Agreement No. 1-2011 of January 4, 2011 is hereby amended as follows:

"ARTICLE 9. MEANS TO INFORM THE CLIENT ABOUT INTEREST RATES, COMMISSIONS, CHARGES FOR THIRD PARTIES OF THE PRODUCTS AND SERVICES. Banks must comply at all times with the obligation contained in Article 193 of the Banking Law, to inform the client, from the beginning of the relationship, the terms and conditions applicable to the particular contract.

In the case of active operations, under the installment payment system, when banks approve the operation, they must communicate the installment to the client in writing, with the minimum inherent information detail. In case of doubts about the concepts contained in said document, the bank must clarify them. After reading the document and resolving any doubts, it must be recorded that the client has been notified and a copy has been delivered.

In contracts with active operations, entities must state the nominal and effective rates, in this order and consecutively, expressed in annualized form, in letters and numbers highlighted to ensure their visibility, as well as the formula for their calculation.

In the case of active operations, whenever there are variations in interest rates, the bank must notify the client in advance, who must keep the bank informed about changes in their address or phone numbers for the purpose of this and other notifications. Likewise, in the event that the insurance policy backing an obligation has expired or been canceled, the Bank must ensure to notify the client of such condition."

ARTICLE 2. Article 11-A is added to Agreement No. 1-2011 of January 4, 2011, as follows:

"ARTICLE 11-A. DISCLOSURE OF INFORMATION ON THE FREEDOM TO CONTRACT INSURANCE. Banks must comply at all times with what is established in Articles 150 and 151 of Law No. 12 of April 3, 2012, which regulates the insurance activity, informing clients, as well as potential clients, prior to the celebration of any contract, of the freedom they have to contract, directly or through the marketing channels authorized and offered by the bank, insurance in those banking operations where the contracting of same is required. In the case of banking entities that offer collective insurance policies, the bank must ensure to inform the client or potential client about the freedom to adhere to a collective insurance or to contract an individual insurance.

In any case, the bank cannot limit or condition the right that the client and potential client has to choose and decide on the insurance entity they consider appropriate to cover a banking operation. Non-compliance with what is stated in this paragraph is considered an abusive practice in accordance with what is provided in Article 11 of Agreement No. 4-2011.

This information must be communicated directly to the client and potential client clearly and by any means, physical or digital, in order to allow them to make informed decisions regarding the freedom to contract in those banking operations that are required.

The bank must ensure to record the communication to clients and potential clients of the information referred to in this article.

When it comes to collective insurance policies offered by the banking entity through an insurance company related to said banking entity, this must ensure compliance with what is provided in Article 162 of Law 12 of 2012, regarding the obligation to deliver to the insured the individual certificate of the policy and keep a record of said delivery to the client. Likewise, in the event that the Bank uses the figure of trust for the structuring of credits, even though the beneficiary of this is the banking entity, it will correspond to the same to notify the client-debtor of the inclusion in the collective insurance, as well as to deliver the individual certificate of the policy and keep a record of said delivery."

ARTICLE 3. VALIDITY. The provisions of this Agreement will begin to govern from its promulgation.

Given in the city of Panama, on the sixteenth (16) 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