Bank liquidation in Panama can be a complex and challenging process, particularly for foreign account holders who may have limited understanding of the local legal and financial landscape. The recovery of assets requires a thorough understanding of local laws and procedures. This article has provided a comprehensive overview of the key aspects of bank liquidation, addressing concerns for foreign account holders and offering insights into the process. By gaining a deeper understanding of the procedures, deadlines, timeframes, and repayment potential, those affected by bank liquidation in Panama can better manage their expectations and navigate the challenges of this difficult situation.

In Panama, corporate liquidation refers to the process of dissolving a business, settling its debts, and distributing the remaining assets to shareholders. Bank liquidation, on the other hand, involves the winding up of a financial institution due to insolvency, regulatory violations, or other factors that render it unable to continue operations.

The rationale behind bank liquidation is to protect depositors, maintain financial stability, and promote public confidence in the banking system. Bank liquidation can have both positive and negative impacts on society, such as preserving the integrity of the financial system and potentially resulting in job losses and reduced access to credit for affected customers.

Banks in Panama may be liquidated when they pose a significant risk to the stability of the financial system, have committed severe regulatory violations, or are insolvent. In contrast, penalties may be imposed on banks for minor violations or as a means to encourage compliance with regulations. The decision to liquidate or penalize a bank is made on a case-by-case basis, considering the severity of the situation and potential consequences for stakeholders.

Panamanian Laws Governing Bank Liquidation

Bank liquidation in Panama is primarily governed by the Banking Law (Decree Law No. 9 of 1998), as well as the Commercial Code and other relevant regulations. The Superintendency of Banks of Panama (SBP) is the main regulatory authority responsible for overseeing and implementing the liquidation process.

Before a bank is liquidated, the SBP may take several steps, including conducting inspections, imposing corrective measures, and requiring the submission of recovery plans. If these measures fail to resolve the issues, the SBP may declare the bank insolvent and initiate liquidation proceedings.

In a bank liquidation, the assets of the distressed bank are valued by an independent appraiser, who determines their fair market value. Assets may be subject to write-downs, depending on their quality and the likelihood of recovery.

The collection of foreign assets can be challenging due to differences in legal jurisdictions, enforcement procedures, and asset protection measures. This may prolong the liquidation process and reduce the amount of assets available for distribution to creditors. A liquidator is appointed by the SBP to manage the bank’s liquidation process, including the valuation and sale of assets, distribution of proceeds to creditors, and resolution of outstanding claims. The liquidator must be a qualified professional with expertise in financial and legal matters.

Asset Distribution to Creditors

Assets are distributed to creditors based on a specific priority of claims and creditor hierarchy, as established by Panamanian law. Secured creditors are given priority, followed by unsecured creditors, with any remaining assets distributed to shareholders. Creditors must submit a Proof of Debt, a document verifying their claim against the bank, to the liquidator. This document must be submitted within the timeframe specified by the liquidator, typically within a few months of the initiation of the liquidation process. The submission process may involve providing supporting documents, such as account statements, loan agreements, or other relevant evidence to substantiate the claim. Failure to submit a Proof of Debt within the specified timeframe may result in the creditor’s claim being disallowed. In Panama, the priority of claims and creditor hierarchy is established by the Commercial Code and the Banking Law. The general order of priority is as follows:

  1. Secured creditors (those with collateral)
  2. Preferred creditors (including certain tax and labor claims)
  3. Unsecured creditors
  4. Subordinated creditors (such as subordinated bondholders)
  5. Shareholders

The duration of the liquidation process in Panama can vary depending on the complexity of the case, the number of creditors, and the ease of asset recovery. On average, the process may take between two and five years. Payouts to creditors may occur in stages as assets are sold and proceeds are distributed. However, the exact timing and amount of payouts will depend on various factors, including the valuation of assets, the success of asset recovery efforts, and the resolution of outstanding claims.