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Towards A More Resilient Financial Sector

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  • Bespalova, Olga

Abstract

Panama is a small and fully dollarized economy that positions itself as an international banking center of Latin America. The resilience of its banks (which hold assets double the size of its GDP), is critical for domestic macroeconomic stability. Conservative banking and improvements in supervision and regulation have helped Panamanian banks to remain sound. However, increasing complexity and concentration in Panama’s banking system call for strengthening the regulatory framework to further safeguard financial stability. This paper suggests policy options to make the financial sector more resilient. First, it provides an overview of the financial system and recent trends, summarizes financial stability oversight and the prudential framework, analyzes the implementation of Basel III standards, and proposes steps to improve financial oversight and update the macroprudential toolkit. Second, it advocates the introduction of an effective financial safety net and upgrading the bank resolution framework. Third, it advises advancing regulatory framework reforms and coordination, and creating a regulatory sandbox for the growing fintech industry.

Suggested Citation

  • Bespalova, Olga, 2020. "Towards A More Resilient Financial Sector," MPRA Paper 117862, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117862
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    References listed on IDEAS

    as
    1. Torsten Wezel & Mr. Jorge A Chan-Lau & Mr. Francesco Columba, 2012. "Dynamic Loan Loss Provisioning: Simulationson Effectiveness and Guide to Implementation," IMF Working Papers 2012/110, International Monetary Fund.
    2. Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
    3. Khaled A. Zedan & Ghassan Daas, 2017. "Palestinian Banks Analysis Using CAMEL Model," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 351-357.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banks; international banking centre; banking system; financial stability; Basel III; financial stability map; financial stability oversight; fintech; cybersecurity; macroprudential toolkit; regulatory sandbox; financial safety net; prudential framework; deposit insurance; stress test; CAMELS; dynamic loss provisioning; financial soundness indicators;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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