Private sector reactivation program

The program will assist banks in providing more medium- and long- term loans (1 to 5 years) for investment in plants and equipment, construction, mortgages for newly constructed buildings, or incremental working capital. The Banco Nacional de Panama will use program funds to cover half the value of these new loans by purchasing interbank certificates of deposit (ICD"s) from the participating banks. Additionally, as an exception, the program may provide short-term liquidity to private banks in order to avoid a bank run when restrictions on the withdrawal of time deposits are lifted on July 10, 1990. Reflows from the program will be used for the purchase of ICD"s during the first two years, whereafter they may be used to repay debt to the United States or multilateral institutions. In return for the cash transfer, the GOP agrees to: (1) modernize banking regulations to permit greater flexibility in areas such as maximum interest rates on certain accounts, interest rate futures, and other financial innovations; and (2) strengthen the National Banking Commission in such areas as bank auditing and portfolio assessment.