Banking on reputation

Banco General's faux pas angers pandemic-stricken account holders in Panama.

Banco General in Panama caused a major upset among many of its clients recently when, without notice, it charged 11,000 account holders with payments in arrears, mainly caused by the economic situation due to the COVID-19 pandemic. The protests of affected clients, who considered the decision arbitrary, prompted the bank to say it had made a mistake and that the funds would be reimbursed within hours. 

The Panamanian banking regulator stated last June that account holders with liquidity issues should contact their banks to restructure their debt before September 30, 2021. A former regulatory official in Panama noted, “It is important to clarify that this resolution does not refer to a moratorium, but to a credit restructure.”

“It is important to clarify that this resolution does not refer to a moratorium, but to a credit restructure.”

Former regulatory official, Panama

A financial advisor in Panama, with clients who were affected, commented, “This is an example of what not to do. The end of this period of restructuring should be seen as an opportunity for banks to actively present alternatives to their clients, taking into account their ability to pay. The reputational damage to Banco General will be huge.” A senior economist agreed, “It is a mistake for banks to rush towards the seizure and auction of assets and goods. They will just end up holding lots of cars and houses that are difficult to sell in the middle of a global economic crisis.”

The incident caused major discomfort among Banco General’s clients which led to dozens of affected account holders protesting in front of the bank’s headquarters. The economist warned, “Panama has been, even before the COVID-19 crisis, in an institutional, social and political crisis with a population that increasingly feels mistreated. This has led to the low popularity of the government and will increase the probability of protests and social conflicts.”

The financial advisor added, “The banks need to realise that the problem, in most cases, was not the fault of their clients, it was a force majeure that put them in this situation. The banks can’t expect to maintain their profit margins when everyone else is suffering.”

“The banks need to realise that the problem, in most cases, was not the fault of their clients, it was a force majeure that put them in this situation.”

Financial advisor, Panama

Concerned about the potential for large-scale withdrawals of money, the National Front for the Defence of Economic and Social Rights, a Panamanian economic activist platform, requested the Prosecution Office to open an investigation into the Banco General events. Zulay Rodríguez, member of the National Assembly of Panama, said that she would present a draft bill to defend bank clients and accused Amauri Castillo, head of the Bank Superintendence, of neglecting the interests of customers. 

The former regulatory official assured us, “What happened with Banco General was a unique case which was addressed quickly and resolved by the bank. Banks must provide their services to clients with transparency, probity and fairness, otherwise the balance of trust between banks and their clients will be broken.”

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