Risks of Banking in Panama: What You Need to Know

The risks of banking in Panama are different for each client. However, generally, Panama risks include reputation risk, transaction risk, credit risk, and foreign exchange risk.

The risks of banking in Panama range from how the country’s reputation can impact transactions to choosing the wrong bank, which can make managing your account extremely difficult.

In this article, we’re going to help you navigate these risks and share several important factors you should consider before opening bank accounts here.

We will also be answering common questions that we receive from our members when considering opening accounts in this Central American banking hub.

This article is part of our free series on how to successfully register and apply to open a bank account in Panama, which you can access by clicking here right now.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Risks of Banking in Panama
  2. Is Panama Safe for Banking?
  3. Frequently Asked Questions
  4. Ready to Open an Offshore Bank Account?

Risks of Banking in Panama

There are three main risks to consider before banking in Panama, which are (1) Panama’s reputation, (2) bank-specific risks, and (3) economic risks that could impact the domestic banking industry. That said, there are also a number of important nuances that can make banking in Panama very challenging. We’ll discuss each of these risks and the additional nuances in detail below.

Is Panama Safe for Banking?

Yes, Panama is safe for banking if you choose the right banks, bankers, and maintain reasonable deposits that match your risk tolerance. That said, like banking in any country, if you choose a bank that has poor management, irresponsible lending, and investing practices, and does not maintain adequate capital and liquidity ratios, it would not be considered “safe”. However, when the right bank is chosen, there are many special incentives and benefits to banking in Panama, which you can learn more about by clicking here and accessing our free guide.

As mentioned, there are three broad risk factors that you should consider before opening accounts with reputable financial companies or the largest banks in Panama, which are reputation, bank risks, and economic risks. Each of these factors is explained in detail below.

Reputation of Panama

Ever since the Panama Papers (2016), this tiny Central American nation has been a constant target for international regulators. But, in many cases, the issues raised have very little to do with banking.

Instead, many of the complaints raised by regulatory bodies center around reporting, activities carried out by the legal profession, and tax evasion.

Unfortunately, whether or not the international community weighs down on Panama for banking or other unrelated activities doesn’t matter. When a country gets added to a greylist or blacklist, it can impact account holders, incoming and outgoing transactions, correspondent banking relationships, management support, and other banking services.

So, before you consider opening in Panama, it’s important to note that Panama is currently listed on the three most impactful blacklists, which are:

FATF Greylist

The Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring

EU Blacklist

The European Union’s list of non-cooperative jurisdictions for tax purposes

UK Blacklist

United Kingdom’s list of high-risk third countries for AML purposes

Why do these lists matter? If you plan on sending transactions to and from Panama to any countries that actively observe these lists, you may be faced with additional documents, stronger security verification measures, and other banking requirements.

For this reason, Panama is usually suitable for individuals looking to transact with countries that do not actively participate in these lists or are members but ignore these lists. The most common example would be the United States, which is supportive of Panama due to the economic relationship between the two countries and, in particular, the Panama Canal.

Bank-Specific Risks in Panama

Not all Panama banks are created equal. This is a given. Certain schedules of institutions and lists of banks in Panama are better managed, better capitalized, and worth considering over others. In Panama, this is especially true when you are looking at banks that cater to foreign non-residents and foreign entities.

That said, unlike many jurisdictions, even the superior banking organizations and the best banks in Panama do not have deposit insurance. At least, not in the traditional sense. Instead, if a bank fails in Panama, the depositors of the bank are treated like a prioritized class of secured creditors, up to a point.

In short, depositors are entitled to get up to 10,000 of their deposits returned to them before any other creditors are made whole. After the initial 10,000, any additional deposits that are returned will depend on the efforts of regulators during the liquidation proceedings.

So, while we don’t advocate relying on deposit insurance to protect your nest egg, we do advocate taking a close look at a bank’s financials, understanding their key ratios, reviewing the account maintenance charges and other costs of banking in Panama, and determining whether or not you trust the bank to protect your money.

Economic Country Risk of Panama

While Panama is a relatively strong economy in terms of Central and Latin American standards, the economic activity is centered around large industry and natural resources. This is beneficial as large economic activity like the Panama Canal can provide insulation against economic shocks.

However, it also means that economic prosperity is not evenly distributed. As a result, economic shocks that impact the general population’s ability to repay loans will impact banks. For this reason, we generally suggest opening accounts with banks that do not engage in (or have limited exposure to) domestic retail lending.

Additional Panama Nuances to Consider

In addition to risks, there are annoyances to banking in Panama that you may want to consider before opening accounts.

In particular, document requests and compliance requests can be burdensome compared to banking in other countries. This is true during the account opening process as well as after the account is opened.

That said, the banks that cater to foreign non-residents are often more understanding of international transactions, specifically how to send money to and from Panama. So, if you can pass the initial account opening challenges, opening a foreign currency account, like an offshore bank account in Panama may still be worth it.

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Frequently Asked Questions

Below are a few of the most common questions we receive from people asking about the risks of banking in Panama. If you have further questions you would like answered, don’t hesitate to get in touch.

What Are the Top 3 Bank Risks in Panama?

The top bank risks in Panama are the same as many other countries, including credit risk, liquidity risk, interest rate risks, and reputation risks. Other countries typically need to be concerned with foreign exchange risk as well. However, since the second financial tender and currency of Panama is USD, this risk is limited. That said, the reputation risk of Panama is higher than it might be in other countries. And, due to a lack of deposit insurance, deposit risk is also a factor that should be considered. So, before opening a business, personal, or a high-end savings account like a private bank account in Panama, it’s important to understand the risks you could face.

Can a US Citizen Open a Bank Account in Panama?

Yes, a US citizen can open a bank account in Panama. In fact, US citizens can even access individual financial resources by opening a personal bank account in Panama 100% remotely. This is true both for US citizens residing in the United States or those residing outside of the United States. Additionally, companies and wealth management entities owned by US citizens can also qualify for commercial financing by opening a business bank account in Panama. This is especially true if there is a clear demonstrable tie to the country of the region.

What Are the Main Risks in the Banking Industry in Panama?

The main risks facing the banking industry in Panama are derived from a lack of available government support in the case of widespread credit default. In other words, unlike larger countries with their own currency, the government of Panama will not be able to stabilize the banking industry in the case of a domestic banking crisis unless a foreign lender (like the US or IMF) decides to step in and assist.

Ready to Open an Offshore Bank Account?

If so, you can access GlobalBanks Insider and start the process of applying for an offshore account in a few clicks.

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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