Interview: Rolando de León de Alba
What changes will the implementation of the Foreign Account Tax Compliance Act (FATCA) have on Panama’s banking regulatory framework?
ROLANDO DE LEÓN: The country’s banking system has already completely adapted to the implementation of FATCA. For a number of years, the local industry has been preparing for any changes that would come from the implementation of the agreement. The only remaining step is signing the intergovernmental agreement to define the mechanism used to report information required by the Internal Revenue Service in the US.
Would you agree that the most pressing challenge Panamanian banks face is making international transactions? What impact is this having on operations and what are banks doing to counteract it?
DE LEÓN: Making international transactions are certainly one of the most, if not the most, important challenges Panamanian banks face today. The only way to overcome this challenge is by being removed from the Financial Action Task Force’s (FATF) grey list. The impact of being on such a list is that banks abroad are cutting their links with Panamanian banks. If these ties are eventually broken, the local financial system will collapse. Hence, it is important that private and public banks come together to bring Panama out of this situation. It is also important that all the stakeholders involved follow the action plan outlined by the Ministry of Economy and Finance. The country is also working on passing an Anti-Money Laundering Law, which would show the FATF that Panama is moving in the right direction to meet the highest international standards.
What areas of the banking sector should be prioritised in the effort to increase automation and why?
DE LEÓN: Efforts should be focused on payment systems that the average customer uses for the normal exchange of goods and services. Such advancement would allow users to accelerate payment processes at a relatively low cost. It is equally important for the banking sector to develop mobile banking infrastructure and services. In this regard, there are some banks that are already taking the first steps to implement the required technology. They are following the examples of countries in Africa and South-east Asia. The impacts are being felt in the market and can already be appreciated. The main advantage of this would be to allow the banking sector to reach remote areas of the country, although there are many other benefits. It is also important to note that there are areas of the sector that are highly automated, such as the card network. Most banks are already a part of this network.
What role should public financial institutions play in developing entrepreneurship? Are there sufficient support mechanisms in place?
DE LEÓN: There are numerous incentives and programmes that are intended to promote entrepreneurship and innovation; however, the challenge remains making these incentives accessible. Therefore, public financing has to support the government in strengthening innovation and entrepreneurship.
This is especially true for entrepreneurship, as it will become crucial to maintaining low figures of unemployment, by reducing dependence on jobs created by the government or foreign direct investment. One way of facilitating this financing is by creating small and medium-sized enterprise-specific divisions within public financing institutions, which is something that has already been done by the main public stakeholders.
What role will public financing play in the implementation of the Ministry of Agriculture and Livestock Development’s five-year plan?
DE LEÓN: Public financing will play a key role in the implementation and development of the ministry’s plan. Not only is $1bn available in the form of loans for the agriculture sector, but it has been agreed that an additional 30% will be made available, provided that the areas in need of financing are clearly identified.
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