Incorporating Banks in Panama
Why We Recommend Panama for Bank Incorporation
Here are our top 10 reasons why you should consider incorporating a bank in Panama:
- A well regulated and respected international banking centre - the largest in all of Latin America with only one bank failure since 1990 (no international depositors lost money).
- Although the USD$3M capitalization requirement for an international (offshore) license is higher then in some other less distinguished jurisdictions, only USD$250,000 of that actually has to be held by the government bank - the rest can stay with the bank as working capital.
- Most jurisdictions require a lot more, if not all of the minimum capitalization amount to be deposited - and frankly we don't know of any jurisdiction where much less then USD$2M will now obtain you a bank license even if the official minimum capitalization amount is still only USD$1M.
- Fast track (60 day) sponsored SWIFT membership.
- The banking superintendent department takes care of the application process for this most important bank facility and allows your bank to be a member without waiting the normal two year waiting period that will usually apply for new banks.
- Guaranteed sponsored correspondent account opening.
- Banks formed in most jurisdictions today have a very difficult time in obtaining bank correspondent accounts with major banks when they are just starting out.
- Strongest banking secrecy laws in the world.
- Since Panama has strong money laundering laws plus is a neutral country (think Panama canal), other than the U.S., most countries have largely left Panama alone and have not brought any pressure to bear for banking privacy laws to be amended.
- Decision guaranteed within 90 days
- please note that the decision may be a request for further information or documentation, but that is never a bad sign. If the decision is positive a temporary licence will first be granted which will give a period of time (usually 6 months) to set up the operation and necessary infrastructure.
- Panama has the best business and technology infrastructure in the hemisphere south of the U.S. / Mexico border.
- Panama is a good communication hub compared to the majority of offshore jurisdictions which are much harder to get to for clientele wishing to visit.
- Panama provides you the opportunity to grow your bank in a zero tax environment with relatively little bureaucratic red tape.
- Due to recent local bank consolidation at the upper end (HSBC Panama buying Banistmo, Citibank Panama buying Banco Uno etc.), the Panama bank superintendent’s office is encouraging new bank licence applications at this time, therefore now is the time to take advantage of this window of opportunity.
The average cost to form a bank in Panama is about USD$50,000 in licencing and legal fees.
It could be somewhat less or it could be a little more, depending on what professional services you provide yourself or whether you need turn key assistance in Panama with things like preparing the business plan and provision of a local senior bank director to serve as the bank's local officer.
Offshore Banking Formation Alternatives
DEPOSIT-TAKING FINANCIAL INSTITUTIONS
There are several non-bank options that can be used for deposit-taking activities which do not require such exacting licensing protocols.
The two most popular are the Swedish Credit Union and New Zealand Offshore Financial Company. Neither of these options require proof of capitalization.
In Panama, there is also the financiera option, which is a growth track many have used to becoming fully fledged banks. The financiera is a finance company authorized to accept loans (in reality 'deposits') from clients and then the funds are loaned out.
This is nothing more than a classic 'savings and loan' type of operation.
The most common type of financieras in Panama are those offering consumer types of loans, but almost any type of lending can be approved on the application. The sum of USD$500,000 is required to be deposited into a local bank as proof of capitalization.
The financiera would have to be a local operation with a properly staffed office.
There are Non-Banking Financial Companies as an Offshore Banking Alternative that are far easier to open, have few requirements, very little paid-in capital and do not carry the same expense and risk as an offshore bank formation and can be formed in days rather than months.
We usually recommend this to our clients, as the list of requirements, procedures, due diligence and capital required are usually so onerous that most all end up quitting the process. So we highly recommend forming a financial company in lieu of starting a bank, as it can operate and carry out many of the same financial services, with a fraction of the formalities. If you are still interested in offshore bank formation, however, and woud like to learn more see below.