Assessing Liquidity Buffers in the Panamanian Banking Sector

Author/Editor:

Andras Komaromi ; Metodij Hadzi-Vaskov ; Torsten Wezel

Publication Date:

October 14, 2016

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 16/200

Subject:

English

Publication Date:

October 14, 2016

ISBN/ISSN:

9781475544824/1018-5941

Stock No:

WPIEA2016200

Format:

Paper

Pages:

22

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