Agreement No. 001-2023: Modification of Article 2 of Agreement No. 3-2016 on Risk-Weighted Assets

Republic of Panama Banking Superintendence AGREEMENT No. 001-2023 (of February 14, 2023) "By which Article 2 of Agreement No. 3-2016 is modified, which establishes norms for the determination of risk-weighted credit assets and counterparty risk"

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 numerals 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 conditions conducive to the development of the Republic of Panama as an international financial center;

That in accordance with numerals 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 to cover risks, 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 its 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 its 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 credit assets and counterparty risk;

That through Article 2 of Agreement No. 3-2016, the classifications of assets by categories are established, for the purposes of their risk weighting;

That in accordance with the guidelines established by the Basel Committee, investment instruments issued by the Bank for International Settlements (BIS) are considered to have a risk weight of 0%;

That in working sessions of this Board of Directors, the need and convenience of modifying Article 2 of Agreement No. 3-2016 has been brought to light, in order to include the Bank for International Settlements (BIS) in Category 1 of assets with a 0% credit risk weight.

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AGREES:

ARTICLE 1. Numerals 1.4 and 1.8 of Category 1 (0% weight) of Article 2 of Agreement No. 3-2016, are hereby amended as follows:

"ARTICLE 2. CLASSIFICATION OF ASSETS BY CATEGORIES. For the purposes of their risk weighting, in accordance with what is established in Article 70 of the Banking Law, assets shall be classified in the following categories whose risk percentage is indicated below:

...

1. Category 1 (0% Weight):

1.1. ...

1.2. ...

1.3. ...

1.4. Instruments issued or guaranteed by the International Monetary Fund (IMF), the Bank for International Settlements (BIS), 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), and by any other multilateral development organizations approved by this Superintendence.

1.5. ...

1.6. ...

1.7. ...

1.8. Loans guaranteed by Instruments issued or guaranteed by the International Monetary Fund (IMF), the Bank for International Settlements (BIS), 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), and by any other multilateral development organizations approved by this Superintendence.

1.9. ...

1.10. ...

1.11. ..."

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

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Given in the city of Panama, on the fourteenth (14) day of the month of February of two thousand twenty-three (2023).

LET IT BE COMMUNICATED, PUBLISHED, AND COMPLIED WITH.

THE PRESIDENT THE SECRETARY Felipe Echandi Lacayo David Alberto Davarro