Assessing Liquidity Buffers in the Panamanian Banking Sector

23 Pages Posted: 9 Dec 2016

See all articles by Andras Komaromi

Andras Komaromi

International Monetary Fund (IMF)

Metodij Hadzi-Vaskov

International Monetary Fund (IMF)

Torsten Wezel

International Monetary Fund (IMF)

Date Written: October 2016

Abstract

This paper assesses the resilience of Panamanian banks to (i) a very severe short-term, and (ii) a significant long-lasting liquidity shock scenario. Short-term liquidity buffers are evaluated by approximating the Liquidity Coverage Ratio (LCR) defined in the Basel III accord. The risk of losing a substantial part of foreign funding is analyzed through a conventional liquidity stress test scrutinizing several layers of liquidity across maturity buckets. The results of this study point to some vulnerabilities. First, our approximations indicate that about half of Panamanian banks would need to adjust their liquid asset portfolios to meet current LCR standards. Second, while most banks would be able to meet funding outflows in the stress-test scenario, a number of banks would have to use up all of their liquidity buffers, and a few even face a final shortfall. Nonetheless, most banks displaying sizable liquidity shortfalls have robust solvency positions.

Keywords: Banking sector, Panama, Liquidity, External shocks, Stress testing, Bank liquidity, LCR, Liquidity stress tests

JEL Classification: G20, G21, G28

Suggested Citation

Komaromi, Andras and Hadzi-Vaskov, Metodij and Wezel, Torsten, Assessing Liquidity Buffers in the Panamanian Banking Sector (October 2016). IMF Working Paper No. 16/200, Available at SSRN: https://ssrn.com/abstract=2882637

Andras Komaromi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Metodij Hadzi-Vaskov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Torsten Wezel

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
2026237399 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
66
Abstract Views
472
Rank
613,074
PlumX Metrics