The banking system

For as long as I remember Panama has been like the banking capital south of North America. Until around 1990 it even enjoyed the special status of banking secrecy. That is until the dictatorship was ousted (thanks God!) and the big colossus of the north decreed that there was evil in the banking system and put their noses on some other nation’s business.

Whatever is good or bad or ugly here is not the fault of any bank or even the super bank, it is just a normal cycle of progress. I am sure at some point in time these things will be improved.

The Good
The are some good things though… The Panamanian banking system has –until now- survived all major world crisis, unlike many other (first world) countries where banks have gone bust.

In fact as far as I recall most (all?) banks in Panama maintain a certain percentage of liquidity to counteract any crisis. To my knowledge the only time the Panamanian banking system truly entered a crisis was during the last years of the dictatorship when the US (again…) imposed heavy sanctions and nearly asphixiated the whole of the Panamanian society (guilty or not), it was not possible to transfer money or even take money from your account. All was frozen and people had to resort to the exchange of goods to survive.

Another good thing is… in Panama you don’t pay taxes over the funds you have saved! that is the way it should be, after all if you saved it you mostly worked for it, for for your work you paid enough taxes already! In other countries such as The Netherlands, you pay –year after year- taxes over your savings which is totally wrong in my opinion.

In Panama the banks are monitored by the Superintendencia de Bancos de Panamá.

The Bad
Nowadays because of the increased drug trafficking problems there is this paranoia in the system assumes everybody will launder money. Wherever you open an account you have to declare the source of your money (eh… work!!!), every relatively large (I think over some thousands) is presumed suspicious. For those of us that are honest this is not really a problem but a nuisance that I have not seen so deep rooted in any other country (perhaps only Colombia).

I think the situation is mildly compounded by the fact that apparently all (I am yet to know of any who doesn’t) banks in Panama operate their foreign money transfers through a correspondent bank abroad. This is problematic for the retirees that need to transfer funds for themselves in Panama due to the “business in the middle”.

While there has been a lot of progress in Panama, I think none of the online-money organizations (such as PayPal, etc.) work with any Panamanian bank. This is a big problem for internet shoppers in Panama because they cannot use PayPal as the rest of the (developed) world does. Believe me, I would rather pay with PayPal than with a credit card!.

Online banking has slowly made its way in Panama although I think most systems are not really thorough in comparison with those that I have seen abroad. The other problem is education, I think in Panama most people are still not very aware of the dangers of online banking (phishing, man-in-the middle) . For years I wondered how much people were probably being victimized by card cloning in ATMs. Recently, this has been in the news and banks are beginning to do something about it. I believe in that sense they should take a good look at countries that have dealt actively with that problem much longer. It is sad to hear of people robbed of their hard earned money by criminals.

If you try to make a money transfer between banks in Panama (online) you will notice that it is not free (in Europe you can transfer money between EU countries without paying a single surcharge cent), sometimes this is not even possible.

Last but not least I think another major hurdle the Panamanian banking system is to overcome is the standardization of bank account numbering. This would have a huge beneficial influence in expediting transfers between banks and reducing the amount of cash on the streets where the criminals are waiting (near literally at the door of your bank). In Panama every bank has its own bank account numbering system, and it is usually a very long number! This is, in my opinion, unnecessary and ridiculous!  Take The Netherlands fore example, with greatly more population than Panama they have (for many many years already) a nationwide system with a fixed number of digits in the account number, the IBAN. Some of these digits identify the bank where the account is (their giro acct. # system is being phased out). This greatly simplifies transferring money and online payments as well. I believe the same is valid for all other European countries.

The Ugly
I already mentioned you don’t pay taxes over your savings or cash on the bank. There is a big problem though, that I know NO bank in Panama guarantees your money!

If the bank goes belly up you lose your money, all of it! The government does not guarantee your (cash) deposits in any way. You save (or put money in checking accounts) at your own risk. Unfortunately the other local alternative is to keep your money at home. That I am afraid is totally unwise, especially in Panama because the criminals will make it their own and leave you without your hard earned money.

Unfortunately there is a lot of crime in Panama, this is not a problem created by the current (Martinelli) government as the dictatorship-aligned people would like you to believe but I will cover that in another post.

In other countries your money is protected up to certain amount per bank (or even bank account). For example in the USA this amount is around $100,000, In the Netherlands –and perhaps other European countries- it is €50,000.

During the last crisis in The Netherlands their governing banking organization raised the guaranteed amount to €100,000 until further notice. That is valid for those banks that are overseen by the local organization, if you go for a non-overseen foreign bank then it is your own risk (as it was with Ice Save bank from Iceland which had a branch in continental Europe).