PART
I
Item
1.
Identity
of Directors, Senior Management and Advisers
Not
required in this Annual Report.
Item
2.
Offer
Statistics and Expected Timetable
Not
required in this Annual Report.
Item
3.
Key
Information
A.
Selected
Financial Data
The
following table presents consolidated selected financial data for the Bank.
The
financial data presented below are at and for the years ended December 31,
2002,
2003, 2004, 2005 and 2006 and are derived from the Bank’s consolidated financial
statements for the years indicated, which were prepared in accordance with
U.S.
generally accepted accounting principles (“U.S. GAAP”) and audited by KPMG. The
consolidated financial statements of the Bank at December 31, 2005 and 2006
and
for each of the years in the three-year period ended December 31, 2006 (the
“Consolidated Financial Statements”) are included in this Annual Report,
together with the report of KPMG. The information below is qualified in its
entirety by the detailed information included elsewhere herein and should be
read in conjunction with “Information on the Company,” “Operating and Financial
Review and Prospects” and the Consolidated Financial Statements and notes
thereto included in this Annual Report.
Consolidated
Selected Financial Information
|
|
At
and for the Year Ended December 31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands, except per share amounts and ratios)
|
|
Income
Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
1
|
|
$
|
64,779
|
|
$
|
53,987
|
|
$
|
42,025
|
|
$
|
45,253
|
|
$
|
58,837
|
|
Commission
income, net
1
|
|
|
8,886
|
|
|
7,446
|
|
|
5,928
|
|
|
5,824
|
|
|
6,285
|
|
Reversal
of (Provision for) credit losses
2
|
|
|
(278,756
|
)
|
|
58,905
|
|
|
112,271
|
|
|
38,374
|
|
|
13,045
|
|
Total
operating expenses
|
|
|
(19,259
|
)
|
|
(22,561
|
)
|
|
(21,352
|
)
|
|
(24,691
|
)
|
|
(28,929
|
)
|
Income
(loss) from continuing operations
|
|
|
(266,492
|
)
|
|
111,496
|
|
|
141,730
|
|
|
77,518
|
|
|
57,902
|
|
Cumulative
effect of accounting changes
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,583
|
|
|
0
|
|
Net
income (loss)
|
|
|
(268,838
|
)
|
|
111,496
|
|
|
141,730
|
|
|
80,101
|
|
|
57,902
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
assets
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
130,076
|
|
Investment
securities
|
|
|
160,714
|
|
|
77,793
|
|
|
192,856
|
|
|
208,570
|
|
|
471,351
|
|
Loans
|
|
|
2,516,512
|
|
|
2,275,031
|
|
|
2,441,686
|
|
|
2,610,019
|
|
|
2,980,772
|
|
Allowance
for loan losses
|
|
|
429,720
|
|
|
224,347
|
|
|
106,352
|
|
|
39,448
|
|
|
51,266
|
|
Total
assets
|
|
|
2,925,401
|
|
|
2,560,612
|
|
|
2,732,940
|
|
|
3,159,231
|
|
|
3,978,338
|
|
Total
deposits
|
|
|
551,973
|
|
|
702,955
|
|
|
864,160
|
|
|
1,046,618
|
|
|
1,056,278
|
|
Trading
liabilities
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
54,832
|
|
Short-term
borrowings and placements
|
|
|
647,344
|
|
|
687,214
|
|
|
704,718
|
|
|
760,699
|
|
|
1,595,604
|
|
Medium
and long-term borrowings and placements
|
|
|
1,285,493
|
|
|
485,516
|
|
|
403,621
|
|
|
533,860
|
|
|
558,860
|
|
Total
liabilities
|
|
|
2,584,002
|
|
|
1,976,283
|
|
|
2,076,810
|
|
|
2,542,449
|
|
|
3,394,442
|
|
Total
stockholders’ equity
|
|
|
328,923
|
|
|
584,329
|
|
|
656,130
|
|
|
616,782
|
|
|
583,896
|
|
Average
number of shares outstanding
|
|
|
17,343
|
|
|
28,675
|
|
|
39,232
|
|
|
38,550
|
|
|
37,065
|
|
Per
Common Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
|
|
|
(15.56
|
)
|
|
3.88
|
|
|
3.61
|
|
|
2.08
|
|
|
1.56
|
|
Diluted
earnings (loss) per share
|
|
|
(15.56
|
)
|
|
3.88
|
|
|
3.60
|
|
|
2.06
|
|
|
1.54
|
|
Book
value (period end)
|
|
|
18.91
|
|
|
14.84
|
|
|
16.87
|
|
|
16.19
|
|
|
16.07
|
|
Cash
dividends per share
|
|
|
0.00
|
|
|
0.00
|
|
|
1.50
|
|
|
2.60
|
|
|
1.75
|
|
Selected
Financial Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets
|
|
|
(6.47
|
)%
|
|
4.24
|
%
|
|
5.83
|
%
|
|
3.00
|
%
|
|
1.70
|
%
|
Return
on average stockholders’ equity
|
|
|
(60.48
|
)%
|
|
23.91
|
%
|
|
22.75
|
%
|
|
12.85
|
%
|
|
9.96
|
%
|
Net
interest margin
3
|
|
|
1.48
|
%
|
|
1.87
|
%
|
|
1.65
|
%
|
|
1.70
|
%
|
|
1.76
|
%
|
Net
interest spread
3
|
|
|
0.96
|
%
|
|
1.23
|
%
|
|
0.98
|
%
|
|
0.67
|
%
|
|
0.70
|
%
|
Total
operating expenses to total average assets
|
|
|
0.46
|
%
|
|
0.86
|
%
|
|
0.88
|
%
|
|
0.93
|
%
|
|
0.85
|
%
|
Cash
dividend payout ratio
|
|
|
0.00
|
%
|
|
0.00
|
%
|
|
41.52
|
%
|
|
125.13
|
%
|
|
112.02
|
%
|
Asset
Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans to total loans, net of unearned income and deferred commission
4
|
|
|
27.62
|
%
|
|
19.62
|
%
|
|
10.50
|
%
|
|
1.11
|
%
|
|
0.00
|
%
|
Charged-off
loans to total loans, net of unearned income and deferred
commission
|
|
|
0.8
|
%
|
|
6.1
|
%
|
|
0.5
|
%
|
|
0.4
|
%
|
|
0.00
|
%
|
Allowance
for loan losses to total loans, net of unearned income and deferred
commission
|
|
|
17.17
|
%
|
|
9.89
|
%
|
|
4.37
|
%
|
|
1.51
|
%
|
|
1.72
|
%
|
Allowance
for credit losses to non-accruing credits
|
|
|
54
|
%
|
|
53
|
%
|
|
48
|
%
|
|
217
|
%
|
|
n.a.
|
|
Capital
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity to total assets
|
|
|
11.24
|
%
|
|
22.82
|
%
|
|
24.01
|
%
|
|
19.52
|
%
|
|
14.68
|
%
|
Tier
1 capital to risk-weighted assets
5
|
|
|
15.26
|
%
|
|
35.42
|
%
|
|
42.90
|
%
|
|
33.74
|
%
|
|
24.45
|
%
|
Total
capital to risk-weighted assets
5
|
|
|
16.51
|
%
|
|
36.67
|
%
|
|
44.15
|
%
|
|
34.99
|
%
|
|
25.70
|
%
|
_____________________
1
|
For
2002, commission expense related to borrowings and placements was
reclassified from commission expense and other charges to interest
expense
to conform to the required presentation for 2003 pursuant to U.S.
GAAP.
|
2
|
For
information regarding reversal (provision) for credit losses, see
“Business Overview” and “Results of
Operations”.
|
3
|
For
information regarding calculation of the net interest margin and
the net
interest spread, see “Results of Operations—Net Interest Income and
Margins”.
|
4
|
Repossessed
assets or troubled debt restructurings as defined in Statement of
Financial Accounting Standards No. 15 amounted to $23 million in
2005, and
$202 million in 2004, and related mostly to Argentine credits.
|
5
|
Calculated
using the U.S. Federal Reserve Board’s 1992 fully phased in risk-weighted
capital guidelines.
|
B.
Capitalization
and Indebtedness
Not
required in this Annual Report.
C.
Reasons
for the Offer and Use of Proceeds
Not
required in this Annual Report.
D.
Risk
Factors
Risks
Relating to the Region
The
Bank’s credit portfolio is concentrated in Latin America and the Caribbean.
Adverse economic changes in those countries, could affect adversely the Bank’s
growth, asset quality, prospects, profitability and financial condition.
The
Bank’s lending activities and, as a result, the credit portfolio is concentrated
in Central and South America and the Caribbean (the “Region”), which is a
reflection of its mission and strategy. Historically, economies of countries
in
the Region have occasionally experienced significant volatility characterized,
in some cases, by political uncertainty, slow growth or recession, declining
investments, government and private sector debt defaults and restructurings,
significant inflation and/or devaluation. Global economic changes, including
oil
prices, commodities prices, the U.S. dollar interest rates and exchange rate,
and slower economic growth in developed countries, could have a significant
adverse effect on the economic condition of countries in the Region. In turn,
adverse changes affecting the economies of countries in the Region could have
a
significant adverse impact on the quality of the Bank’s credit portfolio,
including increased loan loss provisions, debt restructurings, and loan losses
and, as a result, on the Bank’s growth, asset quality, prospects, profitability,
and financial condition.
The
Bank’s lending activities are concentrated in a relatively small number of
countries, which could have an adverse impact on the Bank’s credit portfolio
and, as a result, its financial condition, growth, prospects, cash flows and
results of operations if one or more of those countries encounters economic
difficulties. At December 31, 2006, approximately 64% of the Bank’s credit
portfolio was outstanding to borrowers in the following four countries: Brazil
($1,663 million, or 42%); Colombia ($329 million, or 8%); Mexico ($283 million,
or 7%); and Peru ($280 million, or 7%).
In
addition, at December 31, 2006, 15% of the Bank’s total credits were to five
borrowers in Brazil, and 9% of total credits were to three borrowers from:
Ecuador (3%), Peru (3%), and the Dominican Republic (3%), A significant
deterioration of the financial or economic condition of any of these countries
or borrowers could have an adverse impact on the Bank’s credit portfolio and, as
a result, require the Bank to create additional allowances for credit losses,
or
suffer further credit losses with the effect being accentuated because of this
concentration.
Local
country foreign exchange controls or currency devaluation may harm the Bank’s
borrowers’ ability to pay U.S. dollar-denominated obligations.
The
Bank
makes mostly U.S. dollar-denominated loans and investments. As a result, the
Bank faces the risk that local country foreign exchange controls will restrict
the ability of the Bank’s borrowers, even if they are exporters, to acquire
dollars to repay loans on a timely basis, and/or that significant currency
devaluation will occur, which could increase the cost, in local currency terms,
to the Bank’s borrowers of acquiring dollars to repay loans.
Increased
risk perception in countries in the Region where the Bank has large credit
exposure could have an adverse impact on the Bank’s credit ratings, funding
activities and funding costs.
Increased
risk perception in any country in the Region where the Bank has large exposures
could trigger downgrades to the Bank’s credit ratings. A credit rating downgrade
would likely increase the Bank’s funding costs, and reduce its deposit base and
access to the debt capital markets. In that case, the Bank’s ability to obtain
the necessary funding to carry on its trade finance activities in Latin America
at meaningful levels could be severely hampered.
Risks
Relating to the Bank’s Business
The
Bank’s allowances for credit losses could be inadequate to cover credit losses
related to its loans and contingencies.
The
Bank
determines the appropriate level of allowances for credit losses based in a
process that estimates the probable loss inherent in the portfolio, which is
the
result of a statistical analysis supported by the Bank’s historical portfolio
performance, and the Bank’s management’s qualitative judgment. The latter
includes assumptions and estimates made in the context of changing political
and
economic conditions in the Region. The Bank’s allowances could be inadequate to
cover losses in its credit portfolio, which in turn, could have a material
adverse effect on the Bank’s financial condition and results of operations.
The
Bank’s businesses are subject to market risk.
Market
risk generally represents the risk that values of assets and liabilities or
revenues will be adversely affected by changes in market conditions. Market
risk
is inherent in the financial instruments associated with many of the Bank’s
operations and activities, including loans, deposits, investment and trading
securities, short-term borrowings, long-term debt, derivatives and trading
positions. Among many other market conditions that may shift from time to time,
thereby exposing the Bank to market risk, are fluctuations in interest and
currency exchange rates, changes in the implied volatility of interest rates,
changes in foreign exchange rates and changes in securities prices, due to
changes in either market perception or actual credit quality of either the
issuer or its country of origin. Accordingly, depending on the instruments
or
activities impacted, market risks can have wide ranging, complex adverse affects
on the Bank’s financial condition, results of operations, and
business.
Bladex
faces liquidity risk, and its failure to adequately manage this risk could
produce a liquidity shortage, which could affect adversely its financial
condition and results of operations.
Bladex,
like all financial institutions, faces liquidity risk, or the risk of not being
able to maintain adequate cash flow to repay its deposits, borrowings, and
placements required to fund its credit portfolio on a timely basis. Failure
to
adequately manage its liquidity risk could produce a cash shortage as a result
of which the Bank would not be able to repay these obligations as they become
due.
As
a U.S.
dollar based economy, Panama does not have a central bank in the traditional
sense, and there is no lender of last resort to the banking system in the
country. Central banks in other Latin American countries would not be obligated
to act as lenders of last resort if Bladex were to face a liquidity shortage.
Accordingly, if the Bank faced a liquidity shortage, it would have to rely
on
commercial liquidity sources to resolve it.
Operational
problems or errors can have a material adverse impact on the Bank’s business,
financial condition and results of operations.
Bladex,
like all financial institutions, is exposed to operational risks, including
the
risk of fraud by employees and outsiders, failure to obtain proper internal
authorizations, failure to properly document transactions, equipment failures,
and errors by employees. There can be no assurance that operational problems
or
errors will not occur, and that their occurrence will not have a material
adverse impact on the Bank’s business, financial condition and results of
operations.
The
Bank’s credit portfolio may not continue to grow at the same or similar
rate.
No
assurance can be given that, in the future, the Bank’s credit portfolio,
including the Bank’s foreign trade portfolio, will continue to grow at
historical rates. A reversal in the growth rate of the Region’s economy and
trade volumes could adversely affect the growth rate of the Bank’s credit
portfolio.
Increased
competition and banking industry consolidation could limit the Bank’s ability to
grow and may adversely affect results of operations.
Most
of
the competition the Bank faces in the trade finance area comes from
international banks, the majority of which are European and North American
institutions. Many of these international banks have substantially greater
resources than the Bank and enjoy access to less expensive funding than the
Bank
does. There can be no assurance that increased competition will not affect
adversely the Bank’s growth prospects and results of operations.
Although
some of these international banks compete directly with the Bank, in many cases
they also provide funding for the Bank and represent a source of business.
If
these international banks ceased providing funding to the Bank, the Bank would
be required to seek funding from other sources, which may not be available,
or
if available, may be at higher interest costs.
Merger
activity in the financial services industry has produced companies that are
capable of offering a wide array of financial products and services at
competitive prices. This significant consolidation of the banking business
has
also reduced the number of client banks in the Region for trade finance credit
and services. Globalization of the capital markets and financial services
industries exposes the Bank to further competition. The Bank's ability to grow
its business and therefore, its earnings, is affected by these competitive
pressures.
Any
delays or failure to implement business initiatives that the Bank may undertake
could prevent the Bank from realizing the anticipated revenues and benefits
of
the initiatives.
Part
of
the Bank’s strategy is to diversify income sources through business initiatives,
including
targeting new clients and developing new products and services. These
initiatives may not be fully implemented within the time frame the Bank expects,
or at all. In addition, even if such initiatives are fully implemented, they
may
not generate revenues as expected. Any delays in
implementing
these business initiatives, could prevent the Bank from realizing the
anticipated benefits of the initiatives, which could adversely affect the Bank’s
business, results of operations, and growth prospects
.
Item
4.
Information
on the Company
A.
History
and Development of the Company
The
Bank,
headquartered in Panama City, Panama, is a specialized supranational bank
originally established by central banks of Latin American and Caribbean
countries to promote trade finance in the Region. The Bank was established
pursuant to a May 1975 proposal of the XX Assembly of Governors of central
banks
in the Region, which recommended the creation of a supranational organization
to
increase the Region’s foreign trade financing capacity. The Bank was constituted
in 1978 as a corporation pursuant to the laws of the Republic of Panama as
“Banco Latinoamericano de Exportaciones, S.A.” and commenced operations in
January 1979. The Bank operates under the commercial name of “Bladex”. Panama
was selected as the location of the Bank’s headquarters because of the country’s
importance as a banking center, the benefits of a fully U.S. dollar-based
economy, the absence of foreign exchange controls, its geographic location,
and
the quality of its communications facilities. Under special legislation enacted
in 1978, the Bank was granted certain privileges by the government of Panama,
including an exemption from payment of income taxes in Panama.
Bladex
offers its services through the Bank’s head office and subsidiaries in Panama
City, its subsidiaries and offices in New York City, including its agency (the
"New York Agency") and Bladex Asset Management, its International Administrative
Office in Miami, its subsidiaries in Brazil and the Cayman Islands, its
representative offices in Mexico City and Buenos Aires, and a worldwide network
of correspondent banks. See “Organizational Structure” and Note 1 to the
Consolidated Financial Statements.
B.
Business
Overview
Overview
The
Bank’s mission is to provide seamless support to Latin America’s foreign trade,
while creating value for its stockholders. The Bank is principally engaged
in
providing trade financing to selected commercial banks and corporations in
the
Region. The Bank’s core trade finance products include loans for pre and post
export financing and import of goods, letters of credit, banker’s acceptances
and guarantees. The majority of the Bank’s loans are extended in connection with
specific identified foreign trade transactions. More recently, through its
revenue diversification strategy, the Bank has introduced a broader range of
products, services and solutions associated with foreign trade, including
co-financing arrangements, underwriting, leasing, structured trade and vendor
financing, and US clearing electronic services.
The
Bank’s lending activities are funded by interbank deposits, primarily from
central banks and financial institutions in the Region, by borrowings from
international commercial banks and, to a lesser extent, by sales of debt
securities to financial institutions and investors in Japan, Europe and North
America and the Region. The Bank does not provide retail-banking services to
the
general public, such as retail savings accounts or checking accounts, and does
not take retail deposits.
During
2006, the Bank completed the process of conversion of its treasury area into
a
revenue center. The area is organized around three business platforms, from
which Bladex intermediates in the capital markets throughout the Region. The
Treasury, based in the Panama head office, is responsible for ensuring the
Bank’s funding and liquidity, for the management of its interest rate and
liquidity risks, and for Bladex’s investments in fixed-income securities. Asset
Distribution, based in the New York Agency, was established to intermediate
in
the primary and secondary loan markets in Latin America. Bladex Asset
Management, based in New York, is engaged in the management of a multi-strategy
portfolio of Latin American fixed income securities, currencies, and credit
derivatives.
At
December 31, 2006, the Bank had 47 officers across its offices responsible
for
marketing the Bank’s financial products and services to existing and potential
customers.
Historically,
trade finance generally has not been negatively affected by Latin American
debt
restructurings. This has been due, in part, to the perceived importance that
governments and borrowers in the Region attach to maintaining their access
to
trade finance. In the case of Bladex, the Bank generally has enjoyed “preferred
creditor” status in several countries in the Region, which has strengthened its
position in respect of debt restructurings.
The
Bank,
due in part to its preferred creditor status, generally has been allowed to
negotiate directly with the governments of these countries concerning its loans,
as opposed to negotiating indirectly as a member of a group of creditors in
debt
restructuring proceedings. In addition,
the
Bank’s preferred creditor status has generally exempted it from convertibility
and transfer limitations of U.S. dollars for payment of external obligations.
The Bank believes that its preferred creditor status is partially attributable
to its relationship with its Class A stockholders consisting of central banks
or
governmental financial institutions from 23 countries in the
Region.
Developments
During 2006
During
2006, Bladex achieved net income of $58 million, or $1.56 per share, compared
with net income of $80 million, or $2.08 per share, for 2005. The net income
reduction was driven by lower reversals of credit provisions and recoveries
on
assets, net of impairments, which for 2006 amounted to $19 million, compared
to
$51 million in 2005.
Bladex’s
strategy of diversifying its activities and revenues, as well as broadening
its
services to new clients along new trade-related business lines translated into
an increase of 36% in operating income (net income before net reversals of
credit provisions and recoveries on assets, net of impairments), to $39 million,
compared to $29 million in 2005, reflecting principally a 30% increase in net
interest income, an 8% increase in fee income, and higher gains in Treasury
activities. Net revenues from the impaired portfolio contributed only 6% of
this
operating income, compared to 20% in 2005. Excluding this effect, the real
increase in operating income reached 60%. The increase in the Bank’s revenue,
combined with careful expense control allowed the Bank to improve its operating
efficiency ratio from 46% in 2005 to 42% in 2006. As a result, the Bank’s
operating return on average equity rose to 6.8%, compared to 4.6% in 2005,
and
4.7% in 2004.
Sustained
growth in the Bank’s commercial activity resulted in over $8 billion in credit
disbursements in 2006, and a 19% increase in its average credit portfolio over
2005. This growth was achieved under conditions of high liquidity in the
financial markets and intense regional competition, and was especially
noteworthy in the corporate segment.
The
growth of the Bank’s credit and other business activities was achieved while
maintaining its credit quality, allowing Bladex to close 2006 without any past
due or non-accrual loans. The Bank continued to develop and introduce new
products in 2006. The Bank launched new activities in leasing, and completed
the
transformation of the Treasury function into a profit center, through active
participation in the Region’s fixed income markets and through the creation of a
new proprietary asset management fund.
In
addition, the Bank completed a series of important internal projects in 2006,
such as the deployment of a new technology platform, which has allowed the
Bank
to optimize its responsiveness to clients, improve its operating efficiency,
and
upgrade its information management systems.
Developments
and Strategy for 2007
In
2007,
Bladex continues to focus its efforts on diversifying its revenue sources across
a stronger client franchise, geared towards a growing corporate segment, a
wider
product range, and expanded Treasury operations, with the objective of achieving
improved return on equity levels.
The
Bank
has adjusted its business model to further expand its participation in the
value
chain of international trade flows. In this context, the Bank is developing
and
implementing new products to finance trade flows between the Region and the
rest
of the world, and to facilitate trade between countries within the Region,
thus
strengthening intra-regional commercial flows. As such, the commercial effort
is
primarily focused on offering services to a significant segment of the external
trade business that is not adequately covered by local financial markets, or
by
multinational banks operating in the Region.
To
achieve this, in 2007 Bladex continues to reinforce its product portfolio.
Introducing operational and financial leasing services allows Bladex to offer
additional financing solutions to its clients. The Bank also continues to focus
its efforts on leveraging the Bank’s competitive advantages in originating,
structuring, underwriting, and distributing trade finance transactions by
focusing on maximizing profitability per client, and strengthening the Bank’s
relationships with its clients.
The
Bank
also continues to expand its Treasury activities and continue complementing
its
revenue sources. During 2007, the Bank plans to increase its available for
sale
and held to maturity fixed income portfolio and intends to adjust the structure
of its asset management fund to allow the participation of third-party
investors.
During
the first quarter of 2007, the Bank decided to discontinue its digital identity
project, as the market for the service in the Region was taking longer to mature
than the Bank's management had anticipated. While the project expenses were
relatively small, amounting to less than 3% of the Bank’s operating expenses for
2006, the Bank's management concluded that management time could be put to
better use pursuing other businesses.
Lending
Policies
The
Bank
extends credit directly to banks, corporations and state-owned export
organizations within the Region. The Bank analyzes credit requests from eligible
borrowers in light of credit risk criteria, including economic and market
conditions. The Bank maintains a consistent lending policy and applies the
same
credit criteria to all types of potential borrowers in evaluating
creditworthiness.
The
Bank
finances import and export transactions for all goods and products, with the
exception of articles such as weapons, ammunition, military equipment,
hallucinogenic drugs or narcotics not utilized for medical purposes. Imports
and
exports financed by the Bank are destined for buyers/sellers in countries both
inside and outside the Region.
The
Bank’s loans generally are unsecured. However, in certain instances, based upon
its credit review of the borrower and the economic and political situation
and
trends in the borrower’s home country, the Bank has determined that the level of
risk involved requires that a loan be secured by pledged deposits.
Country
Credit Limits
Bladex
has a methodology for capital allocation by country, aligned with Basel II
and
its risk weights for assets. The Credit Policy and Risk Assessment Committee
(“CPER”) approves a level of “allocated capital” for each country, instead of
nominal exposure limits. These country capital limits are reviewed at least
annually in the quarterly meetings of the aforementioned Committee. The system
establishes the capital equivalent of each transaction, based on the internal
numeric rating assigned to each country (which is approved by this Committee,
on
the basis of recommendations made by the Country Risk Committee comprised by
members of local management). The amounts of capital allocated takes into
account the customer type (sovereign, private, corporate or financial
institutions), the type of transaction (trade or non trade), and the remaining
tenor of the transaction (less than a year, between one and three years, or
more
than three years). Capital utilizations by the business units should never
exceed the Bank’s reported equity.
Borrower
Lending Limits
Generally
the Bank establishes lines of credit for each borrower according to the results
of its risk analysis and business potential prospects; however, the Bank is
not
required to lend under these lines of credit. Once a line of credit has been
established, credit generally is extended after receipt of a request from the
borrower for financing usually related to foreign trade. Loan pricing is
determined in accordance with prevailing market conditions and the borrower’s
creditworthiness.
For
existing borrowers, the Bank’s management has authority to approve credit lines
up to the legal lending limit prescribed by Panamanian law (see
“Regulation—Panamanian Law”), provided that the credit lines comply fully with
the country credit limits and conditions for the borrower’s country of domicile
set by the Board. Approved borrower lending limits are reported to the CPER
quarterly. As of December 31, 2006, the legal lending limit prescribed by
Panamanian law for any one borrower amounted to approximately $175 million.
The
head of the Commercial Area or Treasury Area, or their designees, depending
on
the facility type, recommend proposed credit lines. Approval from the head
of
the Risk Management Area is required for all credit approvals, and approval
from
the Chief Executive Officer also is required for all new clients and for
exposures exceeding $30 million. Certain credit lines require approval by the
CPER. On a quarterly basis, the CPER reviews the impaired portfolio, if any,
along with certain non-impaired credits.
Panamanian
Banking Law prescribes certain concentration limits, which are strictly adhered
to by the Bank, including a 30% limit, applicable to the Bank, as a percentage
of capital and reserves for any one borrower and borrower group. At December
31,
2006, the Bank was in full compliance with all regulatory limits. See
“Regulation—Panamanian Law”.
Credit
Portfolio
The
Bank’s credit portfolio consists of the commercial division portfolio and the
fair value of selected investment securities.
The
Bank’s credit portfolio, increased from $2,944 million at December 31, 2004, to
$3,616 million at December 31, 2005 and to $4,006 million at December 31, 2006.
Commercial
Division Portfolio
The
Commercial Division Portfolio includes book value of loans, securities purchased
under agreements to resell and contingencies (including letters of credit,
reimbursement undertakings, guarantees, credit commitments, equity investments
and customers’ liabilities under acceptances).
The
Bank’s commercial portfolio (excluding non-accruing credits) increased from
$2,463 million at December 31, 2004, to $3,365 million at December 31, 2005
and
to $3,634 million at December 31, 2006.
At
December 31, 2006, 74% of the Bank’s commercial portfolio represented trade
related credits. The following table sets forth the distribution of the Bank’s
commercial portfolio (excluding non-accruing credits), by product category
at
December 31 of each year:
|
|
At
December 31,
|
|
|
|
2002
|
|
%
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
|
|
(in
$ millions, except percentages)
|
|
Loans
|
|
$
|
1,825
|
|
|
75.8
|
|
$
|
1,830
|
|
|
79.8
|
|
$
|
2,186
|
|
|
88.7
|
|
$
|
2,581
|
|
|
76.7
|
|
$
|
2,981
|
|
|
82.0
|
|
Securities
purchased under agreements to resell
|
|
|
132
|
|
|
5.5
|
|
|
132
|
|
|
5.8
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Contingencies
|
|
|
450
|
|
|
18.7
|
|
|
330
|
|
|
14.4
|
|
|
277
|
|
|
11.3
|
|
|
784
|
|
|
23.3
|
|
|
654
|
|
|
18.0
|
|
Total
|
|
$
|
2,407
|
|
|
100.0
|
|
$
|
2,292
|
|
|
100.0
|
|
$
|
2,463
|
|
|
100.0
|
|
$
|
3,365
|
|
|
100.0
|
|
$
|
3,634
|
|
|
100.0
|
|
Loan
Portfolio
At
December 31, 2006,
the
Bank’s total loans amounted to $2,981 million, compared to $2,610 million at
December 31, 2005. See “Changes in Financial Condition—Loans” and Note 6 to the
Consolidated Financial Statements.
Loans
by Country
The
following table sets forth the distribution of the Bank’s loans by country at
December 31 of each year:
|
|
At
December 31,
|
|
|
|
2002
|
|
%
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
|
|
(in
$ millions, except percentages)
|
|
Argentina
|
|
$
|
694
|
|
|
27.6
|
|
$
|
398
|
|
|
17.5
|
|
$
|
207
|
|
|
8.5
|
|
$
|
51
|
|
|
2.0
|
|
$
|
203
|
|
|
6.8
|
|
Bolivia
|
|
|
13
|
|
|
0.5
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
5
|
|
|
0.2
|
|
Brazil
|
|
|
930
|
|
|
37.0
|
|
|
1,011
|
|
|
44.4
|
|
|
1,054
|
|
|
43.2
|
|
|
1,095
|
|
|
42.0
|
|
|
1,317
|
|
|
44.2
|
|
Chile
|
|
|
48
|
|
|
1.9
|
|
|
131
|
|
|
5.8
|
|
|
322
|
|
|
13.2
|
|
|
283
|
|
|
10.8
|
|
|
175
|
|
|
5.9
|
|
Colombia
|
|
|
80
|
|
|
3.2
|
|
|
96
|
|
|
4.2
|
|
|
148
|
|
|
6.1
|
|
|
249
|
|
|
9.5
|
|
|
163
|
|
|
5.5
|
|
Costa
Rica
|
|
|
42
|
|
|
1.7
|
|
|
59
|
|
|
2.6
|
|
|
38
|
|
|
1.5
|
|
|
54
|
|
|
2.1
|
|
|
85
|
|
|
2.9
|
|
Dominican
Republic
|
|
|
156
|
|
|
6.2
|
|
|
24
|
|
|
1.1
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.0
|
|
|
9
|
|
|
0.3
|
|
Ecuador
|
|
|
46
|
|
|
1.8
|
|
|
22
|
|
|
1.0
|
|
|
51
|
|
|
2.1
|
|
|
25
|
|
|
1.0
|
|
|
43
|
|
|
1.4
|
|
El
Salvador
|
|
|
2
|
|
|
0.1
|
|
|
26
|
|
|
1.1
|
|
|
44
|
|
|
1.8
|
|
|
81
|
|
|
3.1
|
|
|
82
|
|
|
2.8
|
|
Guatemala
|
|
|
29
|
|
|
1.1
|
|
|
34
|
|
|
1.5
|
|
|
38
|
|
|
1.6
|
|
|
41
|
|
|
1.6
|
|
|
89
|
|
|
3.0
|
|
Honduras
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
6
|
|
|
0.2
|
|
|
26
|
|
|
1.0
|
|
|
36
|
|
|
1.2
|
|
Jamaica
|
|
|
11
|
|
|
0.4
|
|
|
14
|
|
|
0.6
|
|
|
26
|
|
|
1.1
|
|
|
24
|
|
|
0.9
|
|
|
49
|
|
|
1.6
|
|
Mexico
|
|
|
142
|
|
|
5.6
|
|
|
183
|
|
|
8.0
|
|
|
262
|
|
|
10.7
|
|
|
161
|
|
|
6.1
|
|
|
168
|
|
|
5.6
|
|
Nicaragua
|
|
|
7
|
|
|
0.2
|
|
|
9
|
|
|
0.4
|
|
|
5
|
|
|
0.2
|
|
|
2
|
|
|
0.1
|
|
|
10
|
|
|
0.3
|
|
Panama
|
|
|
19
|
|
|
0.8
|
|
|
44
|
|
|
1.9
|
|
|
89
|
|
|
3.7
|
|
|
156
|
|
|
6.0
|
|
|
180
|
|
|
6.1
|
|
Paraguay
|
|
|
2
|
|
|
0.1
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Peru
|
|
|
63
|
|
|
2.5
|
|
|
65
|
|
|
2.8
|
|
|
55
|
|
|
2.2
|
|
|
180
|
|
|
7.0
|
|
|
262
|
|
|
8.8
|
|
Trinidad
& Tobago
|
|
|
84
|
|
|
3.3
|
|
|
100
|
|
|
4.4
|
|
|
92
|
|
|
3.8
|
|
|
177
|
|
|
6.8
|
|
|
104
|
|
|
3.5
|
|
Uruguay
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
4
|
|
|
0.1
|
|
|
0
|
|
|
0.0
|
|
Venezuela
|
|
|
149
|
|
|
6.0
|
|
|
61
|
|
|
2.7
|
|
|
5
|
|
|
0.2
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.0
|
|
Total
|
|
$
|
2,517
|
|
|
100.0
|
|
$
|
2,275
|
|
|
100.0
|
|
$
|
2,442
|
|
|
100.0
|
|
$
|
2,610
|
|
|
100.0
|
|
$
|
2,981
|
|
|
100.0
|
|
Loans
by Type of Borrower
The
following table sets forth the amounts of the Bank’s loans by type of borrower
at December 31 each year:
|
|
At
December 31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Private
sector commercial banks
|
|
$
|
935
|
|
$
|
986
|
|
$
|
1,243
|
|
$
|
1,583
|
|
$
|
1,167
|
|
State-owned
commercial banks
|
|
|
511
|
|
|
422
|
|
|
563
|
|
|
118
|
|
|
273
|
|
Central
banks
|
|
|
71
|
|
|
0
|
|
|
13
|
|
|
0
|
|
|
0
|
|
Sovereign
debt
|
|
|
90
|
|
|
50
|
|
|
58
|
|
|
49
|
|
|
123
|
|
State-owned
exporting organizations
|
|
|
335
|
|
|
424
|
|
|
363
|
|
|
402
|
|
|
138
|
|
Private
corporations
|
|
|
574
|
|
|
392
|
|
|
201
|
|
|
458
|
|
|
1,279
|
|
Total
|
|
$
|
2,517
|
|
$
|
2,275
|
|
$
|
2,442
|
|
$
|
2,610
|
|
$
|
2,981
|
|
Contingencies
The
Bank
applies to contingencies the same credit policies used in its lending process
to
its evaluation of these instruments. At December 31, 2006, total contingencies
amounted to $654 million, representing 18% of the Bank’s total commercial
portfolio.
The
Bank,
on behalf of its institutional client base, advises and confirms letters of
credit to facilitate foreign trade transactions. The Bank also issues guarantees
to provide coverage for country risk arising from the risk of convertibility
and
transferability of local currency of countries in the Region into hard currency
and to provide coverage for country risk arising from political risks, such
as
expropriation, nationalization, war and/or civil disturbances. At December
31,
2006, total guarantees representing country risk coverage amounted to $124
million. The Bank also enters into credit commitments (defined as a combination
of either non-binding or legal agreements to lend to a customer) in order to
meet the financial needs of customers. See Note 16 to the Consolidated Financial
Statements.
Investment
Securities
The
Bank’s investment securities consist mostly of debt securities held to maturity
and securities available for sale. See Note 5 to the Consolidated Financial
Statements.
In
the
normal course of business, the Bank utilizes interest rate swaps for hedging
purposes in its assets and liabilities management activities, including
investment securities.
At
December 31, 2006, the Bank's investment securities portfolio totaled $471
million, of which 79% consisted of investments with banks and sovereign
borrowers, and the Bank’s total portfolio had a weighted average interest rate
of 6.02% per annum.
Trading
Assets and Liabilities
The
Bank’s trading activity started in April 2006 and is conducted through an asset
management fund incorporated in the Cayman Islands. At December 31, 2006, the
fair value of trading assets was $130 million and trading liabilities was $55
million. See Notes 2(g), 4 and 20 to the Consolidated Financial
Statements.
Total
Outstandings by Country
The
following table sets forth the aggregate amount of the Bank’s cross-border
outstandings, consisting of cash and due from banks, interest-bearing deposits
in other banks, investment securities net of impairment loss on securities,
securities purchased under agreements to resell, trading assets and loans,
but
not including contingencies (collectively “cross-border outstandings”) at
December 31 of each year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
Amount
|
|
%
of Total Outstandings
|
|
Amount
|
|
%
of Total Outstandings
|
|
Amount
|
|
%
of Total Outstandings
|
|
|
|
(in
$ millions, except percentages)
|
|
Argentina
|
|
$
|
208
|
|
|
7.4
|
%
|
$
|
55
|
|
|
1.8
|
%
|
$
|
229
|
|
|
5.9
|
%
|
Brazil
|
|
|
1,065
|
|
|
38.2
|
|
|
1,193
|
|
|
39.1
|
|
|
1,494
|
|
|
38.2
|
|
Chile
|
|
|
362
|
|
|
13.0
|
|
|
315
|
|
|
10.3
|
|
|
210
|
|
|
5.4
|
|
Colombia
|
|
|
172
|
|
|
6.2
|
|
|
260
|
|
|
8.5
|
|
|
278
|
|
|
7.1
|
|
Costa
Rica
|
|
|
38
|
|
|
1.3
|
|
|
54
|
|
|
1.8
|
|
|
85
|
|
|
2.2
|
|
Ecuador
|
|
|
51
|
|
|
1.8
|
|
|
25
|
|
|
0.8
|
|
|
43
|
|
|
1.1
|
|
El
Salvador
|
|
|
59
|
|
|
2.1
|
|
|
101
|
|
|
3.3
|
|
|
87
|
|
|
2.2
|
|
France
|
|
|
15
|
|
|
0.5
|
|
|
1
|
|
|
0.0
|
|
|
50
|
|
|
1.3
|
|
Germany
|
|
|
0
|
|
|
0.0
|
|
|
40
|
|
|
1.3
|
|
|
0
|
|
|
0.0
|
|
Guatemala
|
|
|
38
|
|
|
1.4
|
|
|
41
|
|
|
1.4
|
|
|
89
|
|
|
2.3
|
|
Jamaica
|
|
|
26
|
|
|
0.9
|
|
|
24
|
|
|
0.8
|
|
|
51
|
|
|
1.3
|
|
Japan
|
|
|
45
|
|
|
1.6
|
|
|
35
|
|
|
1.1
|
|
|
33
|
|
|
0.9
|
|
Mexico
|
|
|
364
|
|
|
13.0
|
|
|
199
|
|
|
6.5
|
|
|
268
|
|
|
6.8
|
|
Panama
|
|
|
89
|
|
|
3.2
|
|
|
161
|
|
|
5.3
|
|
|
200
|
|
|
5.1
|
|
Peru
|
|
|
55
|
|
|
2.0
|
|
|
180
|
|
|
5.9
|
|
|
271
|
|
|
6.9
|
|
Spain
|
|
|
24
|
|
|
0.8
|
|
|
48
|
|
|
1.6
|
|
|
73
|
|
|
1.9
|
|
Switzerland
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
40
|
|
|
1.0
|
|
Trinidad
& Tobago.
|
|
|
92
|
|
|
3.3
|
|
|
177
|
|
|
5.8
|
|
|
104
|
|
|
2.6
|
|
United
States
|
|
|
15
|
|
|
0.6
|
|
|
5
|
|
|
0.2
|
|
|
135
|
|
|
3.5
|
|
Other
1
|
|
|
71
|
|
|
2.6
|
|
|
132
|
|
|
4.3
|
|
|
174
|
|
|
4.4
|
|
Total
|
|
$
|
2,789
|
|
|
100.0
|
%
|
$
|
3,048
|
|
|
100.0
|
%
|
$
|
3,914
|
|
|
100.0
|
%
|
______________________
1
|
Other
consists of cross-border outstandings to countries in which cross-border
outstandings did not exceed 1% of total assetsfor any of the periods
indicated above.
|
In
allocating country risk limits, the Bank takes into consideration several
factors, including the Bank’s perception of country risk levels, business
opportunities, and economic and political analysis, applying a portfolio
management approach.
Cross-border
outstandings in countries outside the Region correspond principally to cash
and
due from banks, interest-earning deposits with banks and securities held to
maturity.
The
following table sets forth the amount of the Bank’s cross-border outstandings by
type of institution at December 31 of each year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Private
sector commercial banks
|
|
$
|
1,429
|
|
$
|
1,784
|
|
$
|
1,595
|
|
State-owned
commercial banks
|
|
|
563
|
|
|
184
|
|
|
324
|
|
Central
banks
|
|
|
28
|
|
|
20
|
|
|
0
|
|
Sovereign
debt
|
|
|
110
|
|
|
157
|
|
|
424
|
|
State-owned
exporting organizations
|
|
|
488
|
|
|
434
|
|
|
219
|
|
Private
corporations
|
|
|
171
|
|
|
470
|
|
|
1,352
|
|
Total
|
|
$
|
2,789
|
|
$
|
3,048
|
|
$
|
3,914
|
|
Asset
Quality
The
Bank
believes that its asset quality is linked to the composition of its client
base,
the importance that governments and borrowers in the Region attach to
maintaining continued access to trade financing, its preferred creditor status,
and the Bank’s strict adherence to commercial criteria in its credit activities.
The Bank has developed knowledge of, and a relationship with, most of its client
base throughout its 28 years of operations in the Region, which allows it to
continue to further enhance its risk management process.
The
Bank’s management and the CPER periodically review a report of all loan
delinquencies. The Bank’s collection policies include rapid internal
notification of any delinquency and prompt initiation of collection efforts,
usually involving senior management.
Impaired
Assets and Contingencies
The
Bank’s impaired assets consist of impaired loans and impaired securities. Loans
are identified as impaired and placed on non-accrual status when any principal
or interest payment is over 90 days past due or if the Bank’s management
determines that the ultimate collection of principal or interest is doubtful.
In
all cases, if a borrower has more than one outstanding loan under its line
of
credit with the Bank and any of its individual loans is placed on non-accrual
status, the Bank places all outstanding loans to that borrower on non-accrual
status. Similarly, if a single note of a loan is placed on non-accrual status,
the remaining notes under that loan are placed on non-accrual status as well.
Securities that experience a decline in value, which is deemed other than
temporary, are classified as impaired. Contingencies are identified as impaired
and placed on non-accrual status when any payment of fees or commissions
relating thereto is over 90 days past due or if the Bank’s management determines
that the item may become payable by the Bank and ultimate collection of
principal or interest is doubtful. For more information see Notes 2, 5, 6 and
16
to the Consolidated Financial Statements.
The
following table sets forth information regarding the Bank’s impaired assets and
contingencies at December 31 of each year:
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions, except percentages)
|
|
Impaired
loans
|
|
$
|
691
|
|
$
|
445
|
|
$
|
256
|
|
$
|
29
|
|
$
|
0
|
|
Allocation
from the allowance for loan losses
|
|
|
365
|
|
|
191
|
|
|
82
|
|
|
11
|
|
|
0
|
|
Impaired
loans as a percentage of total loans, net of unearned income and
deferred
commission
|
|
|
27.6
|
%
|
|
19.6
|
%
|
|
10.5
|
%
|
|
1.1
|
%
|
|
0.0
|
%
|
Impaired
contingencies
|
|
$
|
45
|
|
$
|
32
|
|
$
|
32
|
|
$
|
13
|
|
$
|
0
|
|
Allocation
from the reserve for losses on off balance-sheet credit
risks
|
|
|
14
|
|
|
20
|
|
|
21
|
|
|
9
|
|
|
0
|
|
Impaired
contingencies as a percentage of total contingencies
|
|
|
9.2
|
%
|
|
8.8
|
%
|
|
10.5
|
%
|
|
1.7
|
%
|
|
0.0
|
%
|
Impaired
securities (par value)
|
|
$
|
107
|
|
$
|
10
|
|
$
|
5
|
|
$
|
0
|
|
$
|
0
|
|
Estimated
fair value adjustments on options and impaired securities
1
|
|
|
73
|
|
|
5
|
|
|
4
|
|
|
0
|
|
|
0
|
|
Estimated
fair value of impaired securities
|
|
$
|
35
|
|
$
|
5
|
|
$
|
1
|
|
$
|
0
|
|
$
|
0
|
|
Impaired
securities as a percentage of total securities
2
|
|
|
21.6
|
%
|
|
6.8
|
%
|
|
0.5
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Impaired
assets and contingencies as a percentage of total credit
portfolio
3
|
|
|
23.4
|
%
|
|
17.0
|
%
|
|
9.8
|
%
|
|
1.2
|
%
|
|
0.0
|
%
|
______________________
1
Includes
impairment losses on securities, estimated unrealized gain (loss) on impaired
securities, premiums and discounts.
2
Total
securities consist of investment securities considered part of the Bank’s credit
portfolio.
3
The
total
credit portfolio consists of loans net of unearned income, fair value of
investment securities, securities purchased under agreements to resell and
contingencies.
Allowance
for Credit Losses
The
allowance for credit losses (which includes the allowance for loan losses and
the reserve for losses on off-balance sheet credit risk) covers the credit
risk
on loans and contingencies. The allowance for credit losses includes an
asset-specific component and a formula-based component in line with FAS 5.
The
asset-specific component relates to a provision for losses on credits considered
impaired and measured on a case-by-case basis pursuant to FAS 114. For
additional information regarding allowance for credit losses, see Notes 2 (k)
and 7 to the Consolidated Financial Statements.
During
the third quarter of 2005, Bladex implemented a new methodology for estimating
generic allowances for credit losses. The new methodology is driven primarily
by
Bladex’s own historical probability of default and loss experience, as well as
an internal country risk classification, rather than relying exclusively on
third party data, as was formerly the case. This change in methodology was
the
result of the Bank’s decision to adopt best practices in the banking industry,
and is in line with FAS 5, which calls for the use of internal historical
performance data in the estimation of credit loss reserves. The Bank began
compiling its eight-year historical database in 2004 and completed this effort
during 2005.
The
reserve balances for estimating generic allowances, for both on and off-balance
sheet credit exposures, are calculated applying the following
formula:
Reserves
=
S
(E
x PD x
LGD)
where:
|
a)
|
Exposure
(E) = the total accounting balance (on and off-balance sheet) at
the end
of the period under review, segregated by
country.
|
|
b)
|
Probabilities
of Default (PD) = one-year probability of default applied to the
portfolio
in each country. Default rates are based on Bladex’s historical portfolio
performance per country rating category during an eight-year period,
complemented by probabilities of default data from international
credit
rating agencies for high risk cases, in view of the greater robustness
of
credit rating agencies data for such
cases.
|
|
c)
|
Loss
Given Default (LGD) = a factor of 45% is utilized, based on best
practices
in the banking industry. This factor applies to all countries, except
those classified as higher risk, in which case management applies
historical loss experience on a case-by-case basis.
|
The
following table sets forth information regarding the Bank’s allowance for credit
losses with respect to total credits outstanding at December 31 of each
year:
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions, except percentages)
|
|
Components
of the allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
$
|
177
|
|
$
|
430
|
|
$
|
224
|
|
$
|
106
|
|
$
|
39
|
|
Provision
(reversal)
|
|
|
273
|
|
|
(70
|
)
|
|
(111
|
)
|
|
(48
|
)
|
|
12
|
|
Effect
of change in methodology
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(6
|
)
|
|
0
|
|
Cumulative
effect on prior years (2004) of a change in credit loss reserve
methodology
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(6
|
)
|
|
0
|
|
Recoveries
|
|
|
0
|
|
|
2
|
|
|
6
|
|
|
3
|
|
|
0
|
|
Loans
charged-off
|
|
|
(21
|
)
|
|
(138
|
)
|
|
(13
|
)
|
|
(9
|
)
|
|
0
|
|
Balance
at the end of the year
|
|
$
|
430
|
|
$
|
224
|
|
$
|
106
|
|
$
|
39
|
|
$
|
51
|
|
Reserve
for losses on off-balance sheet credit risk:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the year
|
|
$
|
17
|
|
$
|
23
|
|
$
|
34
|
|
$
|
33
|
|
$
|
52
|
|
Provision
(reversal)
|
|
|
6
|
|
|
11
|
|
|
(1
|
)
|
|
(0
|
)
|
|
(25
|
)
|
Effect
of change in methodology
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
16
|
|
|
0
|
|
Cumulative
effect on prior years (2004) of a change in credit loss reserve
methodology
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3
|
|
|
0
|
|
Balance
at end of the year
|
|
$
|
23
|
|
$
|
34
|
|
$
|
33
|
|
$
|
52
|
|
$
|
27
|
|
Total
allowance for credit losses
|
|
$
|
453
|
|
$
|
258
|
|
$
|
139
|
|
$
|
92
|
|
$
|
78
|
|
Allowance
for credit losses to total credit portfolio
|
|
|
13.7
|
%
|
|
9.1
|
%
|
|
4.7
|
%
|
|
2.5
|
%
|
|
2.0
|
%
|
The
effect of the change in credit loss methodology for 2005 decreased net income
by
$10 million, or $0.26 per share (resulting from a loan loss reserve provision
reversal of $6 million, and an off-balance sheet reserve provision charge of $16
million). In addition, the adjustment to apply retroactively the new methodology
(to December 31, 2004) increased net income for 2005 by $3 million (resulting
from a loan loss reserve provision reversal of $6 million and an off-balance
sheet reserve provision charge of $3 million). The pro-forma amounts shown
on
the income statement have been adjusted for the effect of retroactive
application of the credit loss reserve, which could have been applied, had
the
new methodology been in effect.
The
$12
million overall positive impact on 2005 net income as it relates to the
allowance for loan losses results from the use by the Bank of its own historical
portfolio performance to determine the probabilities of default, whereas the
previous methodology utilized only probabilities of default data from
international credit rating agencies, which are more severe than the Bank’s,
given the more selective and specialized nature of the Bank’s portfolio
(short-term trade finance). To a lesser extent, the result was also affected
by
the use of the current methodology of one-year probabilities of default, given
the short-term nature of the Bank’s portfolio (average maturity of 264 days),
whereas the previous methodology utilized the probabilities of default of the
remaining tenor of each loan, which resulted in more severe factors when
exposures were longer term.
With
regard to the reserve for losses on off-balance sheet credit risk, the $19
million overall negative impact on 2005 net income reflected the use by the
previous methodology of a somewhat lower probability of default for off-balance
sheet items, whereas the current methodology applies the same factor to both
on
and off-balance sheet items. This is because the Bank’s data at this date is not
sufficiently large to allow for segregated probabilities of default on a robust
basis. In this regard, we note that the Bank determined, in the aftermath of
the
Argentine crisis, to reserve for both on and off-balance sheet items on an
equal
basis.
The
following table sets forth information regarding the Bank’s allowance for credit
losses allocated by country of exposure at December 31 of each
year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
Total
|
|
%
|
|
|
|
(in
$ millions, except percentages)
|
|
Argentina
|
|
$
|
83.9
|
|
|
60.2
|
%
|
$
|
21.0
|
|
|
23.0
|
%
|
$
|
25.4
|
|
|
32.4
|
%
|
Brazil
|
|
|
29.3
|
|
|
21.0
|
|
|
18.5
|
|
|
20.2
|
|
|
11.2
|
|
|
14.3
|
|
Colombia
|
|
|
1.3
|
|
|
0.9
|
|
|
0.5
|
|
|
0.5
|
|
|
1.7
|
|
|
2.2
|
|
Dominican
Republic
|
|
|
3.9
|
|
|
2.8
|
|
|
1.2
|
|
|
1.3
|
|
|
2.6
|
|
|
3.3
|
|
Ecuador
|
|
|
14.4
|
|
|
10.3
|
|
|
46.1
|
|
|
50.4
|
|
|
30.0
|
|
|
38.3
|
|
Jamaica
|
|
|
1.0
|
|
|
0.7
|
|
|
0.2
|
|
|
0.3
|
|
|
2.4
|
|
|
3.1
|
|
Mexico
|
|
|
1.2
|
|
|
0.8
|
|
|
0.1
|
|
|
0.1
|
|
|
1.2
|
|
|
1.6
|
|
Peru
|
|
|
1.3
|
|
|
1.0
|
|
|
2.8
|
|
|
3.0
|
|
|
0.6
|
|
|
0.8
|
|
Other
1
|
|
|
3.2
|
|
|
2.3
|
|
|
1.2
|
|
|
1.3
|
|
|
3.2
|
|
|
4.1
|
|
Total
Allowance for Credit Losses
|
|
$
|
139.5
|
|
|
100.0
|
%
|
$
|
91.5
|
|
|
100.0
|
%
|
$
|
78.5
|
|
|
100.0
|
%
|
____________________
1
|
Other
consists of allowance for credit losses allocated to countries in
which
allowance for credit losses outstandings did not exceed $1 million
for any
of the periods indicated above.
|
The
following table sets forth information regarding the Bank’s allowance for credit
losses by type of borrower at December 31 of each year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Private
sector commercial banks
|
|
$
|
30.1
|
|
$
|
19.8
|
|
$
|
14.9
|
|
State-owned
commercial banks
|
|
|
60.0
|
|
|
18.0
|
|
|
5.3
|
|
Central
banks
|
|
|
10.0
|
|
|
36.1
|
|
|
20.5
|
|
Sovereign
debt
|
|
|
0.0
|
|
|
1.1
|
|
|
1.1
|
|
State-owned
exporting organization
|
|
|
6.6
|
|
|
3.1
|
|
|
1.5
|
|
Private
corporations
|
|
|
32.6
|
|
|
13.5
|
|
|
35.1
|
|
Total
|
|
$
|
139.5
|
|
$
|
91.5
|
|
$
|
78.5
|
|
The
following table sets forth the distribution of the Bank’s loans charged-off
against the allowance for loan losses, by country at December 31 of each
year:
|
|
2002
|
|
%
|
|
2003
|
|
%
|
|
2004
|
|
%
|
|
2005
|
|
%
|
|
2006
|
|
%
|
|
|
|
(in
$ millions, except percentages)
|
|
Argentina
|
|
$
|
20
|
|
|
95.3
|
|
$
|
137
|
|
|
99.4
|
|
$
|
13
|
|
|
100.0
|
|
$
|
5
|
|
|
53.7
|
|
$
|
0
|
|
|
0.0
|
|
Brazil
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
4
|
|
|
46.3
|
|
|
0
|
|
|
0.0
|
|
Mexico
|
|
|
1
|
|
|
4.7
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Paraguay
|
|
|
0
|
|
|
0.0
|
|
|
1
|
|
|
0.6
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
|
0
|
|
|
0.0
|
|
Total
|
|
$
|
21
|
|
|
100.0
|
|
$
|
138
|
|
|
100.0
|
|
$
|
13
|
|
|
100.0
|
|
$
|
9
|
|
|
100.0
|
|
$
|
0
|
|
|
0.0
|
|
Reversals
of Argentine Specific Provision for Credit Losses
The
crisis in Argentina that began in December 2001, escalated into a full-scale
political and economic crisis, which resulted in the default by the Argentine
government on more than $50 billion of sovereign debt. Efforts by the Argentine
government to contain the situation were followed by civil unrest and riots
and
a succession of government collapses and resignations
.
This
economic crisis resulted in the imposition by the Argentine government of a
number of measures, including a freeze on bank deposits, forced conversion
of
dollar-denominated bank deposits, a 70% currency devaluation, and the imposition
of exchange controls. Because of the Argentine crisis, the Bank’s Argentine
obligors faced repayment difficulties. At December 31, 2001, the Bank’s
Argentine credit portfolio totaled $1 billion. The Bank classified as impaired
nearly its entire Argentine exposure due to these collectibility concerns and
increased its allowance for credit losses during 2001 and 2002 by $77 million
and $279 million, respectively, bringing the total credit reserves assigned
to
its Argentine portfolio to $380 million at December 31, 2002.
In
the
years following the crisis, Argentina continued to experience significant
problems and uncertainties, such as its defaults on debt with the World Bank
and
IMF, exchange controls, the need for important structural reforms (related
to
public security and the financial system), and political conflicts and domestic
uncertainty. These factors forced the Bank to maintain strong provisioning
coverage on its Argentine portfolio during these years.
Beginning
in 2002, the Bank negotiated the restructuring of its Argentine portfolio and
sold at a discount most of the positions that the Bank estimated had the lowest
probability of collection. At the close of 2003, the Bank had restructured,
sold
or charged-off all of its non-performing exposures, with the exception of four
clients for a total $34 million. During 2004 and 2005, the Bank was able to
sell
these four exposures. The restructuring process was made possible in part by
the
exception granted to Bladex by the Central Bank of Argentina regarding the
foreign exchange controls imposed at the early stage of the crisis.
In
2003,
economic conditions in Argentina start
ed
to
improve gradually. After an 11% negative economic growth in 2002, the country
achieved a 9% GDP growth in 2003, and in each of the following two years. The
country benefited from post-crisis catch-up effects and a declining interest
rate environment, combined with increasing prices of its most important
commodities, wheat and soy, driven by a strong demand from Asian markets, which
had a positive effect on the country’s balance of payments and current accounts.
During 2005, the country benefited from the sovereign foreign debt restructuring
process, involving a deep discount in value and reduced interest payments,
which
eased the pressure on its balance of payments and consequently, increased the
availability of hard currency for Argentine corporations to repay their
obligations.
The
following table shows Argentina’s key economic indicators for the years
indicated, reflecting an improved economic scenario from 2003 through
2006:
Key
Economic Indicators - Argentina
1
|
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
Real
GDP Growth (%)
|
|
|
-0.8
|
%
|
|
-4.4
|
%
|
|
-10.9
|
%
|
|
8.8
|
%
|
|
9.0
|
%
|
|
9.2
|
%
|
|
8.5
|
%
|
Fiscal
Balance (% GDP)
|
|
|
-2.4
|
%
|
|
-3.2
|
%
|
|
-1.5
|
%
|
|
0.5
|
%
|
|
3.1
|
%
|
|
1.8
|
%
|
|
1.8
|
%
|
Public-sector
Debt (% GDP)
|
|
|
45.1
|
%
|
|
53.8
|
%
|
|
145.9
|
%
|
|
138.3
|
%
|
|
127.3
|
%
|
|
73.5
|
%
|
|
64.6
|
%
2
|
Inflation
(%)
|
|
|
-0.7
|
%
|
|
-1.5
|
%
|
|
41.0
|
%
|
|
3.7
|
%
|
|
6.1
|
%
|
|
12.3
|
%
|
|
9.8
|
%
|
Current
Account ($ millions)
|
|
|
-8,989
|
|
|
-3,336
|
|
|
8,710
|
|
|
8,051
|
|
|
3,158
|
|
|
5,625
|
|
|
8,054
|
|
Current
Account (% GDP)
|
|
|
-3.2
|
%
|
|
-1.2
|
%
|
|
8.5
|
%
|
|
6.2
|
%
|
|
2.1
|
%
|
|
3.1
|
%
|
|
3.8
|
%
|
Forex
Reserves ($ millions)
|
|
|
25,147
|
|
|
14,553
|
|
|
10,489
|
|
|
14,153
|
|
|
19,646
|
|
|
28,077
|
|
|
32,037
|
|
Debt
Service ratio (%)
|
|
|
70.8
|
%
|
|
42.2
|
%
|
|
59.8
|
%
|
|
79.3
|
%
|
|
66.9
|
%
|
|
47.3
|
%
|
|
n.a.
|
|
|
1
|
Source:
Banco Central de la República
Argentina.
|
|
2
|
This
ratio corresponds to the third quarter of
2006.
|
These
factors contributed to a gradual improvement and more stable economic situation,
which in turn improved the financial flexibility of many of the Bank’s clients,
allowing them to comply with their contracted payments or make prepayments.
As a
result, the Bank was able to decrease its impaired loan portfolio in Argentina
by $191 million, $184 million, and $23 million, for the years 2004, 2005, and
2006, respectively, as well as to recover previously charged-off loans,
resulting in reversals of loan loss provisions for $105 million, $48 million,
and $10 million, respectively. These reversals resulted from loan collections
and sales that exceeded their respective net book values.
The
following table sets forth information regarding the Bank’s reversals
(provisions) of allowance for loan losses during the years indicated:
|
|
For
the year ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Argentine
reversals related to sale of loans
|
|
$
|
6.3
|
|
$
|
2.9
|
|
$
|
0.0
|
|
Argentine
reversals related to credit restructurings and collections, and changes
in
expected loss levels
|
|
|
92.5
|
|
|
45.1
|
|
|
10.2
|
|
Total
Argentine Specific Reserves Reversals
|
|
$
|
98.8
|
|
$
|
47.9
|
|
$
|
10.2
|
|
Brazil
Specific Reserves Reversals (Provisions)
|
|
|
(2.2
|
)
|
|
13.2
|
|
|
1.0
|
|
Total
Specific Reserves Reversals
|
|
$
|
96.6
|
|
$
|
61.1
|
|
$
|
11.2
|
|
Generic
Reserves Reversals (Provisions) - due to changes in credit portfolio
composition and risk levels
|
|
$
|
8.4
|
|
$
|
(15.5
|
)
|
$
|
(23.0
|
)
|
Generic
Reserves Reversals - due to change in credit loss reserve methodology
|
|
|
0.0
|
|
|
6.0
|
|
|
0.0
|
|
Total
Generic Reserves Reversals (Provisions)
|
|
$
|
8.4
|
|
$
|
(9.6
|
)
|
$
|
(23.0
|
)
|
Recoveries
- Argentine credits
|
|
|
6.4
|
|
|
0.3
|
|
|
0.0
|
|
Recoveries
- Other credits
|
|
|
0.0
|
|
|
2.3
|
|
|
0.0
|
|
Total
Recoveries
|
|
$
|
6.4
|
|
$
|
2.6
|
|
$
|
0.0
|
|
Total
Reversals (Provisions) of Allowance for Loan
Losses
|
|
$
|
111.4
|
|
$
|
54.2
|
|
$
|
(11.8
|
)
|
Revenues
Per Country
The
following table sets forth information regarding the Bank’s approximate net
revenues per country at the dates indicated, with net revenues calculated as
the
sum of net interest income, fees and commissions, net derivatives and hedging
activities, trading gains, net gain on sale of securities available for sale,
gain (loss) on foreign currency exchange and other income, net.
|
|
For
the year ended December 31,
|
|
|
|
2004
|
|
2005
2
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Argentina
|
|
$
|
14.6
|
|
$
|
5.7
|
|
$
|
4.2
|
|
Brazil
|
|
|
17.9
|
|
|
23.4
|
|
|
31.4
|
|
Chile
|
|
|
1.1
|
|
|
2.9
|
|
|
2.7
|
|
Colombia
|
|
|
2.2
|
|
|
3.4
|
|
|
3.6
|
|
Costa
Rica
|
|
|
0.0
|
|
|
0.0
|
|
|
1.6
|
|
|
|
|
For
the year ended December 31,
|
|
|
|
|
2004
|
|
|
2005
2
|
|
|
2006
|
|
|
|
|
(in
$ millions)
|
|
Dominican
Republic
|
|
|
1.1
|
|
|
1.0
|
|
|
1.0
|
|
Ecuador
|
|
|
2.8
|
|
|
2.5
|
|
|
2.9
|
|
El
Salvador
|
|
|
0.6
|
|
|
1.2
|
|
|
1.5
|
|
Guatemala
|
|
|
0.0
|
|
|
0.0
|
|
|
1.3
|
|
Jamaica
|
|
|
0.6
|
|
|
1.2
|
|
|
1.5
|
|
Mexico
|
|
|
4.1
|
|
|
4.7
|
|
|
5.0
|
|
Panama
|
|
|
0.6
|
|
|
1.6
|
|
|
3.6
3.4
|
|
Peru
|
|
|
1.1
|
|
|
1.4
|
|
|
3.4
|
|
Trinidad
and Tobago
|
|
|
0.0
|
|
|
0.0
|
|
|
1.8
|
|
Venezuela
|
|
|
1.2
|
|
|
0.7
|
|
|
1.0
|
|
Other
1
|
|
|
2.9
|
|
|
3.9
|
|
|
1.8
|
3
|
Total
|
|
$
|
50.8
|
|
$
|
53.6
|
|
$
|
68.2
|
|
____________________
1
Other
consists of net revenues per country in which net revenues did not exceed $1
million for any of the periods indicated above.
2
Starting
in 2005, derivatives & hedging activities are included as part of net
revenues, as the Treasury Area became one of the Bank’s revenue
centers.
3
It
includes $627 thousand corresponding to the Bank’s proprietary asset management
fund.
The
$15
million increase in net revenues for 2006 compared to 2005, was mainly due
to:
|
·
|
a
$14 million, or 30%, increase in net interest income, mostly driven
by:
|
|
§
|
a
26% increase in the average accruing loan and investment portfolio;
and
|
|
§
|
an
increase of 6 basis points in net interest margin, resulting from
the
impact of increasing interest rates on the Bank’s available capital, wider
lending spreads, and lower cost of
funds.
|
|
§
|
These
factors were partially offset by the impact of lower interest collections
on the Bank’s richly priced non-accruing portfolio over the
period.
|
|
·
|
a
$1 million, or 12%, increase in non-interest income, mostly driven
by:
|
|
§
|
an
8% increase in fee income; and
|
|
§
|
higher
gains in Treasury activities.
|
The
$3
million increase in net revenues for 2005 compared to 2004, was primarily due
to:
|
·
|
the
positive effect of higher interest rates on the Bank’s interest-earning
assets;
|
|
·
|
the
positive effect of an increase in the average credit portfolio from
$2,705
million in 2004 to $3,081 million in 2005;
and
|
|
·
|
revenues
from gains on hedging activities.
|
|
·
|
These
factors were offset by the impact of lower interest collections on
the
Bank’s decreasing and richly priced non-accruing portfolio, as well as
lower net lending margins and lower gains on the sale of Argentine
impaired securities.
|
Competition
The
Bank
operates in a highly competitive environment in most of its markets. Management
recognizes that the Bank needs to continue to invest and adapt in order to
remain competitive. The Bank faces strong competition principally from regional
and international banks in making loans, and providing fee-generating services.
The Bank competes in its lending and deposit taking activities with other banks
and international financial institutions, many of which have greater financial
resources and offer sophisticated banking services. Whenever economic conditions
and risk perception improve in the largest countries of the Region, competition
from commercial banks, the securities markets and other new participants tends
to increase. Competition may have the effect of reducing the spreads of the
Bank’s lending rates over its funding costs and constraining the Bank’s
profitability.
The
trade
finance business is subject to change. Increased open account exports and new
financing requirements from multinational corporations are changing the way
banks intermediate foreign trade financing. The Bank cannot predict with
certainty the changes that may occur and how these may affect the
competitiveness of its businesses.
The
Bank
believes that competition also comes from investment banks and the local and
international securities markets, which provide liquidity to the financial
systems in certain countries in the Region, as well as non-bank specialized
financial institutions. The Bank competes primarily on the basis of pricing
and
quality of service. Moreover, the Bank has developed customer loyalty because
it
has been a consistent source of trade-related financing. The Bank also believes
that its operating efficiencies, commitment to the Region, preferred creditor
status, market knowledge, and business focus constitute important competitive
advantages in certain markets. See “Risk Factors”.
Regulation
General
The
Superintendency of Banks of Panama (the “Superintendency of Banks”) regulates,
supervises and examines Bladex. The New York Agency is regulated, supervised
and
examined by the New York Banking Department and the Federal Reserve Board.
Bladex Offshore Feeder Fund and Bladex Capital Growth Fund are regulated by
government authorities in the Cayman Islands. The regulation of the Bank by
relevant Panamanian authorities differs from the regulation generally imposed
on
banks, including foreign banks, in the United States by U.S. federal and state
regulatory authorities.
As
of
October 5, 2004, the Superintendency of Banks entered into an arrangement for
the sharing of supervisory information with various U.S. regulators, including
the Federal Reserve Board, the Office of the Comptroller of Currency and the
Federal Deposit Insurance Corporation (the “Statement of Cooperation”). The
Statement of Cooperation promotes cooperation between U.S. and Panamanian
banking regulators and demonstrates the commitment of the U.S. regulators and
the Superintendency of Banks to the principles of comprehensive consolidated
supervision.
Panamanian
Law
On
February 26, 1998, Panama adopted Decree-Law No. 9 (the “Banking Law”), which is
a comprehensive revision and restatement of the banking legislation in Panama.
The Banking Law took effect on June 12, 1998.
The
Bank
operates in Panama under a General Banking License issued by the National
Banking Commission, predecessor of the Superintendency of Banks, and is subject
to supervision and examination by the Superintendency of Banks. Banks operating
under a General Banking License (“General License Banks”) may engage in all
aspects of the banking business in Panama, including accepting local and
offshore deposits, as well as entering into banking transactions in Panama
that
may have an economic impact outside of Panama.
General
License Banks must have paid-in capital of not less than $10 million.
Additionally, General License Banks must maintain minimum capital of 8% of
their
total risk-weighted assets. The capital adequacy standards used by the
Superintendency of Banks are based on the Basel Capital Accord. The
Superintendency of Banks is authorized to increase the minimum capital
requirement percentage in Panama in the event that generally accepted
international capitalization standards as set forth in the Basel Capital Accord
become more stringent.
General
License Banks are required to maintain 30% of their global deposits in liquid
assets (which include short-term loans to other banks and other liquid assets)
of the type prescribed by the Superintendency of Banks. Under the Banking Law,
deposits from central banks and other similar depositories of the international
reserves of sovereign states are immune from attachment or seizure
proceedings.
Pursuant
to the Banking Law, the Bank cannot make loans or issue guarantees or any other
obligation to any one person or a group of related persons in excess of thirty
percent (30%) of its capital.
Under
the
Banking Law, a bank may not grant loans or issue guarantees or any other
obligation to “related parties” that exceed (1) 5% of its total capital, in the
case of unsecured transactions, (2) 10% of its total capital, in the case of
collateralized transactions (other than loans secured by deposits in the bank),
and (3) 25% of the Capital Funds of the Bank, in the case the total amount
of
all operations of the Bank and that of the subsidiaries that consolidate with
for loans and credit facilities granted to Related Parties and for indebtedness
title investment issued by Related Parties. For these purposes a “related party”
is (a) any one or more of the bank’s directors, (b) any stockholder of the
bank who directly or indirectly owns 5% or more of the outstanding and issued
capital stock of the bank, (c) any company of which one or more of the bank’s
directors is a director or officer or where one or more of the bank’s directors
is a guarantor of the loan or credit facility, (d) any company or entity in
which the bank or any one of its directors or officers can exercise a
controlling influence, (e) any company or entity in which the bank or any one
of
its directors or officers owns 20% or more of the outstanding and issued capital
stock of such company or entity and (f) managers, officers and employees of
the
bank, or their respective spouses (other than home mortgage loans or guaranteed
personal loans under general programs approved by the bank for employees).
The
Superintendency of Banks may authorize the total or partial exclusion of loans
or credits from the computation of these limitations in cases of unsecured
loans
and other credits granted by mixed-capital banks with headquarters in Panama
whose principal business is the granting of loans to other banks, which is
the
case of the Bank. This authorization is contingent on the following conditions:
(i) the ownership of shares in the debtor bank -directly or indirectly- by
the
shared director or shared officer, may not exceed five-percent (5%) of the
said
bank's capital, or may not amount to any sum that would ensure his or her
majority control over the decisions of this bank; (ii) the ownership of shares
in the creditor bank -directly or indirectly- by the debtor bank represented
in
any manner by the shared director or shared officer, may not exceed five-percent
(5%) of the shares outstanding of the creditor bank, or may not amount to any
sum that would ensure his or her majority control over the decisions of this
bank; (iii) the shared director or shared officer must abstain from
participating in the deliberations and in the voting sessions held by the
creditor bank regarding the loan or credit request under this article, and
(iv)
the loan or credit must strictly comply with customary standards of discretion
set by the grantor bank's credit policy. The Superintendency of Banks shall
determine the amount of the exclusion in the case of each loan or credit
submitted for its consideration.
The
Banking Law contains additional limitations and restrictions with respect to
related party loans and credit facilities. For instance, under the Banking
Law,
all loans made to managers, officers, employees or stockholders who are owners
of 5% or more of the lending Bank’s outstanding and issued capital stock shall
be made on terms and conditions similar to those given by the bank to its
clients in arm’s-length transactions and which reflect market conditions. Shares
of a bank cannot be pledged or offered as security for loans or credit
facilities issued by such bank.
In
addition to the foregoing requirements, there are certain other restrictions
applicable to General License Banks, including (1) a requirement that a bank
must notify the Superintendency of Banks before opening or closing a branch
or
office in Panama and obtain approval from the Superintendency of Banks before
opening or closing a branch or subsidiary outside Panama and (2) a requirement
that a bank obtain approval from the Superintendency of Banks before it
liquidates its operations, merges or consolidates with another bank or sells
all
or substantially all of its assets. The subsidiaries of Panamanian banks
established in foreign jurisdictions must observe the legal and regulatory
provisions applicable in Panama regarding the sufficiency of capital, as
prescribed under the Banking Law.
The
Banking Law provides that banks in Panama are subject to inspection by the
Superintendency of Banks, which must take place at least once every two years.
These supervisory powers of the Superintendency of Banks also extend to a bank’s
subsidiaries and branches.
The
Superintendency of Banks last inspected the Bank during April and May 2006,
and
the results of this inspection were fully satisfactory.
The
Superintendency of Banks is empowered to request from any bank or any company
that belongs to the economic group of which a bank in Panama is a member, the
documents and reports pertaining to its operations and activities. Banks are
required to file with the Superintendency of Banks monthly, quarterly and
annually information, including financial statements, an analysis of their
credit facilities and any other information, requested by the Superintendency
of
Banks. In addition, banks are required to make available for inspection any
reports or documents that are necessary for the Superintendency of Banks to
ensure compliance with Panamanian banking laws and regulations. Banks subject
to
supervision may be fined by the Superintendency of Banks for violations of
Panamanian banking laws and regulations.
Panamanian
Anti Money Laundering laws and regulations
.
In
Panama, all banks and all trust corporations must take necessary measures to
prevent their operations and/or transactions from being used to commit the
felony of money laundering, terrorism financing or any other illicit activity
contemplated in the laws and regulations addressing this matter.
United
States Law
Bladex
operates a New York state-licensed agency in New York, New York and maintains
a
wholly-owned non-banking subsidiary in Delaware, Bladex Holdings Inc., that
is
not engaged in activities other than owning two wholly owned subsidiaries
incorporated under the laws of the State of Delaware: Clavex, LLC, incorporated
on June 15, 2006, and Bladex Asset Management, Inc. incorporated on May 24,
2006. On October 30, 2006, the Bank established an International Administrative
Office in Miami, Florida (the “Miami Office”).
New
York State Law
.
The New
York Agency, established in 1989, is licensed by the Superintendent of Banks
of
the State of New York (the “Superintendent”) under the New York Banking Law. The
New York Agency maintains an international banking facility that also is
regulated by the Superintendent and the Federal Reserve Board. The New York
Agency is examined by the New York State Banking Department and is subject
to
banking laws and regulations applicable to a foreign bank that operates a New
York agency. New York agencies of foreign banks are regulated substantially
the
same as, and have similar powers to, New York state-chartered banks, except
with
respect to capital requirements and deposit-taking activities.
The
Superintendent is empowered by law to require any branch or agency of a foreign
bank to maintain in New York specified assets equal to a percentage of the
branch or agency’s liabilities, as the Superintendent may designate. Under the
current requirement, the New York Agency is required to maintain a pledge of
1%
of its total third-party liabilities, subject to a minimum of $2 million. At
December 31, 2006, the New York Agency maintained a pledge of $5.5 million,
complying with the minimum required amount.
In
addition, the Superintendent retains the authority to impose specific asset
maintenance requirements upon individual agencies of foreign banks on a
case-by-case basis. No special requirement has been prescribed for the New
York
Agency.
The
Superintendent is authorized to take possession of the business and property
of
a New York agency of a foreign bank whenever an event occurs that would permit
the Superintendent to take possession of the business and property of a
state-chartered bank. These events include the violation of any law, unsafe
business practices, an impairment of capital, and the suspension of payments
of
obligations. In liquidating or dealing with an agency’s business after taking
possession of the agency, the New York Banking Law provides that the claims
of
creditors which arose out of transactions with the agency may be granted a
priority with respect to the agency’s assets over other creditors of the foreign
bank.
Florida
State Law
.
The
Miami Office, established in October 2006, is licensed and supervised
by
the
Florida Office of Financial Regulation
under
the
Florida Financial Institutions Codes. The Miami Office is subject to certain
activities restrictions described below as well as to Florida banking laws
and
regulations that are applicable generally to foreign banks that operate offices
in Florida. The Miami Office is also subject to regulation by the Federal
Reserve Board under the International Banking Act of 1978 (the
“IBA”).
Pursuant
to Florida law, the Miami Office is authorized to conduct certain “back office”
functions on behalf of the Bank, including administration of the Bank’s
personnel and operations, data processing and record keeping activities, and
negotiating and servicing loans or extensions of credit and investments. Under
the provisions of the IBA and the regulations of the Federal Reserve Board,
the
Florida International Administrative Office is also permitted to function as
a
representative office of the Bank. In this capacity it may solicit new business
for the Bank and conduct research. It may also act in a liaison capacity between
the Bank and its customers.
Federal
Law
.
In
addition to being subject to New York and Florida state laws and regulations,
the New York Agency and the Florida International Administrative Office are
subject to federal regulations, primarily under the IBA and is subject to
examination and supervision by the Federal Reserve Board. The IBA generally
extends federal banking supervision and regulation to the United States offices
of foreign banks and to the foreign bank itself. Under the IBA, the United
States branches and agencies of foreign banks, including the New York Agency,
are subject to reserve requirements on certain deposits. At present, the New
York Agency has no deposits subject to such requirements. The New York Agency
also is subject to reporting and examination requirements imposed by the Federal
Reserve Board similar to those imposed on domestic banks that are members of
the
Federal Reserve System. The Foreign Bank Supervision Enhancement Act of 1991
(the “FBSEA”) has amended the IBA to enhance the authority of the Federal
Reserve Board to supervise the operations of foreign banks in the United States.
In particular, the FBSEA has expanded the Board’s authority to regulate the
entry of foreign banks into the United States, supervise their ongoing
operations, conduct and coordinate examinations of their U.S. offices with
state
banking authorities, and terminate their activities in the United States for
violations of law or for unsafe or unsound banking practices.
In
addition, under the FBSEA, state-licensed branches and agencies of foreign
banks
may not engage in any activity that is not permissible for a “federal branch”
(i.e., a branch of a foreign bank licensed by the federal government through
the
Office of the Comptroller of the Currency of the Treasury Department (“OCC”),
rather than by a state), unless the Federal Reserve Board has determined that
such activity is consistent with sound banking practices.
The
New
York Agency does not engage in retail deposit-taking in the United States,
and
deposits with the New York Agency are not insured by the Federal Deposit
Insurance Corporation (“FDIC”). Under the FBSEA, the New York Agency may not
obtain FDIC insurance and generally may not accept deposits of less than
$100,000.
The
IBA
also restricts the ability of a foreign bank with a branch or agency in the
United States to engage in nonbanking activities in the United States, to the
same extent as a United States bank holding company. Bladex is subject to
certain provisions of the Federal Bank Holding Company Act of 1956 (the “BHCA”)
because it maintains an agency in the United States. Generally, any nonbanking
activity engaged in by Bladex directly or through a subsidiary in the United
States is subject to certain limitations under the BHCA. Under the
Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), a
foreign bank with a branch or agency in the United States may engage in a
broader range of non-banking financial activities, provided it is qualified
and
has filed a declaration with the Federal Reserve Board to be a “financial
holding company” (“FHC”). As of the date hereof, Bladex has not filed such
declaration with the Federal Reserve Board. At present, Bladex has one
subsidiary in the United States, Bladex Holdings Inc. (“Bladex Holdings”), that
is incorporated under Delaware law. That subsidiary is not engaged in any
activity, other than owning two Delaware Companies, which are Bladex Asset
Management, Inc. and Clavex, LLC.
The
USA
PATRIOT Act of 2001 (the “PATRIOT Act”) substantially broadened the scope of
U.S. anti-money laundering laws and regulations by imposing significantly new
compliance and due diligence obligations, creating new crimes and penalties
and
expanding the extraterritorial jurisdiction of the United States. Failure of
a
financial institution to comply with the PATRIOT Act’s requirements could have
serious legal and reputational consequences for an institution. Both the New
York Agency and the Miami Office are “financial institutions” within the meaning
of the PATRIOT Act.
Cayman
Islands Law
Bladex
Offshore Feeder Fund and Bladex Capital Growth Fund are exempted companies
incorporated in the Cayman Islands with limited liability, incorporated on
February 21, 2006 under the Companies Law (2004 Revision) of the Cayman Islands.
The registered office of these companies is at PO Box 309GT, Ugland House,
South
Church Street, George Town, Grand Cayman, Cayman Islands.
The
Companies Law (2004 Revision) of the Cayman Islands (the "Companies Law") is
derived, to a large extent, from the older Companies Acts of England, although
there are significant differences between the Companies Law and the current
Companies Act of England. Section 193 of the Companies Law requires that Bladex
Offshore Feeder Fund and Bladex Capital Growth Fund shall not trade in the
Cayman Islands with any person, firm or corporation except in furtherance of
the
business of these companies carried on outside the Cayman Islands. This does
not
prevent Bladex Offshore Feeder Fund and Bladex Capital Growth Fund from
effecting and concluding contracts in the Cayman Islands and exercising in
the
Cayman Islands all of its powers necessary for the carrying on of its business
outside the Cayman Islands.
Cayman
Islands Anti-Money Laundering laws and regulations. The Proceeds of Criminal
Conduct Law (2005 Revision) and the Terrorism Law (2003 Revision) of the Cayman
Islands impose reporting obligations on residents of the Cayman Islands who
know
or suspect the involvement of another person in money laundering or terrorist
activities.
C.
Organizational
Structure
For
information regarding the Bank’s organizational structure see Note 1 to the
Consolidated Financial Statements.
D.
Property,
Plants and Equipment
The
Bank
owns its principal offices, with office space of 3,457 square meters, located
at
Calle 50 y Aquilino de La Guardia in Panama City. In addition, the Bank leases
office space for its representative offices in Mexico and Buenos Aires, Bladex
Representação Ltda. in Brazil, its New York Agency, Bladex Asset Management in
New York, and its International Administrative Office in Miami. See Notes 2
(n)
and 17 to the Consolidated Financial Statements.
Item
5.
Operating
and Financial Review and Prospects
The
following discussion should be read in conjunction with the Bank’s Consolidated
Financial Statements and the Notes thereto included elsewhere in this Annual
Report.
Nature
of Earnings
The
Bank
derives income from net interest income, fee income, gains of securities
available for sale and from trading gains. Net interest income, or the
difference between the interest income the Bank receives on its interest-earning
assets and the interest it pays on interest-bearing liabilities, is generated
principally by the Bank’s lending activities. The Bank generates fee income
mainly through the issuance, confirmation and negotiation of letters of credit
and guarantees covering commercial and country risk, loan origination and
sales.
A.
Operating
Results
The
following table summarizes changes in components of the Bank’s net income and
performance at and for the periods indicated.
|
|
At
and For the Year Ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands, except per share amounts and percentages)
|
|
|
|
|
|
|
|
|
|
Total
interest income
|
|
$
|
76,152
|
|
$
|
116,823
|
|
$
|
203,350
|
|
Total
interest expense
|
|
|
34,127
|
|
|
71,570
|
|
|
144,513
|
|
Net
interest income
|
|
|
42,025
|
|
|
45,253
|
|
|
58,837
|
|
Reversal
of (provision for) loan losses
|
|
|
111,400
|
|
|
54,155
|
|
|
(11,846
|
)
|
Net
interest income after reversal of (provision for) loan
losses
|
|
|
153,425
|
|
|
99,408
|
|
|
46,991
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
Reversal
of (provision for) losses on off-balance sheet credit risk
|
|
|
871
|
|
|
(15,781
|
)
|
|
24,891
|
|
Commission
income, net
|
|
|
5,928
|
|
|
5,824
|
|
|
6,285
|
|
Derivatives
and hedging activities
|
|
|
47
|
|
|
2,338
|
|
|
(225
|
)
|
Recoveries
(impairment) on securities
|
|
|
0
|
|
|
10,206
|
|
|
5,551
|
|
Trading
gains
|
|
|
0
|
|
|
0
|
|
|
879
|
|
Net
gain on sale of securities available for sale
|
|
|
2,922
|
|
|
206
|
|
|
2,568
|
|
Gain
(loss) on foreign currency exchange
|
|
|
(194
|
)
|
|
3
|
|
|
(253
|
)
|
Other
income, net
|
|
|
83
|
|
|
5
|
|
|
144
|
|
Net
other income
|
|
|
9,657
|
|
|
2,801
|
|
|
39,840
|
|
Total
operating expenses
|
|
|
(21,352
|
)
|
|
(24,691
|
)
|
|
(28,929
|
)
|
Income
before cumulative effect of changes in accounting
principles
|
|
$
|
141,730
|
|
$
|
77,518
|
|
$
|
57,902
|
|
Cumulative
effect on prior years (to December 31, 2004) of a change in the credit
loss reserve methodology
|
|
|
0
|
|
|
2,733
|
|
|
0
|
|
Cumulative
effect on prior years (to December 31, 2004) of an early adoption
of the
fair-value-based method of accounting stock-based employee
compensation
|
|
|
0
|
|
|
(150
|
)
|
|
0
|
|
Net
income
|
|
$
|
141,730
|
|
$
|
80,101
|
|
$
|
57,902
|
|
Net
income per share
|
|
$
|
3.61
|
|
$
|
2.08
|
|
$
|
1.56
|
|
Diluted
earnings per share
|
|
$
|
3.60
|
|
$
|
2.06
|
|
$
|
1.54
|
|
Return
on average assets
|
|
|
5.8
|
%
|
|
3.0
|
%
|
|
1.7
|
%
|
Return
on average stockholders’ equity
|
|
|
22.8
|
%
|
|
12.9
|
%
|
|
10.0
|
%
|
Net
Income
During
2006, Bladex achieved net income of $58 million, compared with net income of
$80
million for 2005. The reduction in net income during 2006 resulted from lower
reversals of credit provisions and recoveries on assets, net of impairments,
which for 2006 amounted to $19 million, compared to $51 million in
2005.
The
$62
million net income reduction during 2005 was driven by lower net reversals
of
both credit provisions and impairment losses, which amounted to $51 million,
compared to $112 million in 2004, resulting from the $247 million reduction
in
the non-accruing credit portfolio in Argentina
and
Brazil. Excluding the impact of the reversals of credit provisions and
impairment losses, and net revenues from the non-accruing portfolio, net income
for 2005 grew by 42%.
Net
Interest Income and Margins
The
following table sets forth information regarding net interest income, the Bank’s
net interest margin (the net interest income divided by the average balance
of
interest-earning assets), and the net interest spread (the average yield earned
on interest-earning assets, less the average yield paid on interest-bearing
liabilities) for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions, except percentages)
|
|
Interest
income
|
|
|
|
|
|
|
|
|
|
|
Accruing
assets
|
|
$
|
57
|
|
$
|
108
|
|
$
|
201
|
|
Non-accruing
assets
|
|
|
19
|
|
|
9
|
|
|
3
|
|
Total
interest income
|
|
|
76
|
|
|
117
|
|
|
203
|
|
Interest
expense
|
|
|
(34
|
)
|
|
(72
|
)
|
|
(145
|
)
|
Net
interest income
|
|
$
|
42
|
|
$
|
45
|
|
$
|
59
|
|
Net
interest margin
|
|
|
1.65
|
%
|
|
1.70
|
%
|
|
1.76
|
%
|
Net
interest spread
|
|
|
0.98
|
%
|
|
0.67
|
%
|
|
0.70
|
%
|
The
$14
million, or 30%, increase in net interest income during 2006 was driven by
a 26%
increase in the average accruing loan and investment portfolio, as a well as
higher net interest margin (6 bps), the latter resulting from the impact of
increasing interest rates on the Bank’s available capital, wider lending
spreads, reflecting changes in the Bank’s portfolio mix, and lower cost of
funds. These factors were partially offset by the lower interest collections
on
the Bank’s (richly) priced non-accruing portfolio over the period.
The
$3
million increase in net interest income and the increase in net interest margin
in 2005 compared to 2004 were mainly due to the positive effect of higher market
interest rates on the Bank’s interest earning assets. This factor offset the
impact of lower interest collections on the Bank’s decreasing non-accruing
portfolio, which resulted in the decline in net interest spread.
Distribution
of Assets, Liabilities and Stockholders’ Equity; Interest Rates and
Differentials
The
following table presents the distribution of consolidated average assets,
liabilities and stockholders’ equity, as well as the total dollar amounts of
interest income from average interest-earning assets and the resulting yields,
and the dollar amounts of interest expense and average interest-bearing
liabilities, and corresponding information regarding rates. All impaired loans
are on non-accruing status, and interest on these loans is accounted for on
a
cash basis. Average balances have been computed on the basis of consolidated
daily average balance sheets.
|
|
Year
ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
Description
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
Average
balance
|
|
Interest
|
|
Average
yield/rate
|
|
|
|
(in
$ millions, except percentages)
|
|
Interest-Earning
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits with banks
|
|
$
|
213
|
|
$
|
3
|
|
|
1.28
|
%
|
$
|
158
|
|
$
|
5
|
|
|
3.19
|
%
|
$
|
180
|
|
$
|
9
|
|
|
4.90
|
%
|
Securities
purchased under agreements to resell
|
|
|
89
|
|
|
2
|
|
|
1.92
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
Loans,
net
|
|
|
1,792
|
|
|
47
|
|
|
2.58
|
|
|
2,211
|
|
|
93
|
|
|
4.15
|
|
|
2,697
|
|
|
163
|
|
|
5.96
|
|
Impaired
loans
|
|
|
356
|
|
|
19
|
|
|
5.16
|
|
|
106
|
|
|
9
|
|
|
8.10
|
|
|
18
|
|
|
3
|
|
|
14.77
|
|
Trading
assets
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
50
|
|
|
6
|
|
|
11.46
|
|
Investment
securities
|
|
|
92
|
|
|
6
|
|
|
6.31
|
|
|
181
|
|
|
10
|
|
|
5.43
|
|
|
390
|
|
|
23
|
|
|
5.76
|
|
Total
interest-earning assets
|
|
$
|
2,542
|
|
$
|
76
|
|
|
2.95
|
%
|
$
|
2,656
|
|
$
|
117
|
|
|
4.34
|
%
|
$
|
3,336
|
|
$
|
203
|
|
|
6.01
|
%
|
Non-interest-earning
assets
|
|
$
|
61
|
|
|
|
|
|
|
|
$
|
81
|
|
|
|
|
|
|
|
$
|
90
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
(179
|
)
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
Other
assets
|
|
|
7
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,432
|
|
|
|
|
|
|
|
$
|
2,667
|
|
|
|
|
|
|
|
$
|
3,403
|
|
|
|
|
|
|
|
Interest-Bearing
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
772
|
|
$
|
12
|
|
|
1.52
|
%
|
$
|
869
|
|
$
|
30
|
|
|
3.36
|
%
|
|
1,106
|
|
$
|
57
|
|
|
5.05
|
%
|
Securities
sold under repurchase agreements
|
|
|
159
|
|
|
2
|
|
|
1.29
|
|
|
40
|
|
|
1
|
|
|
2.92
|
|
|
306
|
|
|
16
|
|
|
5.29
|
|
Short-term
borrowings and placements
|
|
|
374
|
|
|
7
|
|
|
1.92
|
|
|
565
|
|
|
19
|
|
|
3.36
|
|
|
738
|
|
|
39
|
|
|
5.16
|
|
Medium-
and long-term borrowings and placements
|
|
|
401
|
|
|
13
|
|
|
3.14
|
|
|
451
|
|
|
22
|
|
|
4.72
|
|
|
500
|
|
|
28
|
|
|
5.57
|
|
Trading
liabilities
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
0
|
|
|
0
|
|
|
n.a.
|
|
|
35
|
|
|
5
|
|
|
13.17
|
|
Total
interest-bearing liabilities
|
|
$
|
1,707
|
|
$
|
34
|
|
|
1.97
|
%
|
$
|
1,925
|
|
$
|
72
|
|
|
3.67
|
%
|
$
|
2,684
|
|
$
|
145
|
|
|
5.31
|
%
|
Non-interest
bearing liabilities and other liabilities
|
|
$
|
102
|
|
|
|
|
|
|
|
$
|
118
|
|
|
|
|
|
|
|
$
|
137
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
$
|
1,809
|
|
|
|
|
|
|
|
$
|
2,044
|
|
|
|
|
|
|
|
$
|
2,821
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
623
|
|
|
|
|
|
|
|
|
623
|
|
|
|
|
|
|
|
|
581
|
|
|
|
|
|
|
|
Total
Liabilities, Redeemable Preferred Stock and Stockholders’
Equity
|
|
$
|
2,432
|
|
|
|
|
|
|
|
$
|
2,667
|
|
|
|
|
|
|
|
$
|
3,403
|
|
|
|
|
|
|
|
Net
Interest Spread
|
|
|
|
|
|
|
|
|
0.98
|
%
|
|
|
|
|
|
|
|
0.67
|
%
|
|
|
|
|
|
|
|
0.70
|
%
|
Net
Interest Income and Net Interest Margin
|
|
|
|
|
$
|
42
|
|
|
1.65
|
%
|
|
|
|
$
|
45
|
|
|
1.70
|
%
|
|
|
|
$
|
59
|
|
|
1.76
|
%
|
Changes
in Net Interest Income — Volume and Rate Analysis
Net
interest income is affected by changes in volume and changes in interest rates.
Volume changes are caused by differences in the level of interest-earning assets
and interest-bearing liabilities. Rate changes result from differences in yields
earned on interest-earning assets and rates paid on interest-bearing
liabilities. The following table sets forth a summary of the Bank’s changes in
net interest income of the Bank resulting from changes in average
interest-earning asset and interest-bearing liability balances (volume) and
changes in average interest rates for 2005 compared to 2004 and 2006 compared
to
2005. Volume and rate variances have been calculated based on movements in
average balances over the period and changes in interest rates on average
interest-earning assets and average interest-bearing liabilities. Variances
caused by changes in both volume and rates have been allocated equally to volume
and rate.
|
|
2005
vs. 2004
|
|
2006
vs. 2005
|
|
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
Volume
|
|
Rate
|
|
Net
Change
|
|
|
|
(in
$ thousands)
|
|
Increase
(Decrease) in interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits with banks
|
|
|
($1,238
|
)
|
$
|
3,593
|
|
$
|
2,356
|
|
$
|
914
|
|
$
|
2,939
|
|
$
|
3,853
|
|
Securities
purchased under agreements to resell
|
|
|
(867
|
)
|
|
(867
|
)
|
|
(1,733
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
Loans,
net
|
|
|
14,312
|
|
|
31,656
|
|
|
45,968
|
|
|
24,916
|
|
|
45,141
|
|
|
70,058
|
|
Impaired
loans
|
|
|
(16,848
|
)
|
|
6,861
|
|
|
(9,987
|
)
|
|
(10,180
|
)
|
|
4,196
|
|
|
(5,984
|
)
|
Trading
assets
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,905
|
|
|
2,905
|
|
|
5,810
|
|
Investment
securities
|
|
|
5,313
|
|
|
(1,245
|
)
|
|
4,068
|
|
|
11,836
|
|
|
955
|
|
|
12,791
|
|
Total
increase (decrease)
|
|
$
|
673
|
|
$
|
39,998
|
|
$
|
40,671
|
|
$
|
30,391
|
|
$
|
56,135
|
|
$
|
86,527
|
|
Increase
(Decrease) in interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,392
|
|
|
15,228
|
|
|
17,620
|
|
|
10,090
|
|
|
16,961
|
|
|
27,051
|
|
S
Securities
sold under repurchase agreements
..
|
|
|
(2,539
|
)
|
|
1,650
|
|
|
(889
|
)
|
|
11,065
|
|
|
4,167
|
|
|
15,232
|
|
Short-term
borrowings and placements
|
|
|
5,112
|
|
|
6,796
|
|
|
11,908
|
|
|
7,460
|
|
|
11,901
|
|
|
19,361
|
|
Medium-
and long-term borrowings and placements
|
|
|
2,000
|
|
|
6,804
|
|
|
8,804
|
|
|
2,540
|
|
|
4,120
|
|
|
6,660
|
|
Trading
liabilities
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,320
|
|
|
2,320
|
|
|
4,640
|
|
Total
increase (decrease)
|
|
$
|
6,965
|
|
$
|
30,479
|
|
$
|
37,443
|
|
$
|
33,474
|
|
$
|
39,469
|
|
$
|
72,943
|
|
Increase
(Decrease) in net interest income
|
|
$
|
(6,292
|
)
|
$
|
9,520
|
|
$
|
3,228
|
|
$
|
(3,082
|
)
|
$
|
16,666
|
|
$
|
13,584
|
|
Reversal
of (Provision for) Loan Losses
The
Bank’s $12 million provision for loan losses during 2006 was mainly due to the
net effect of:
|
·
|
a
$23 million generic provision charge, due to increased loan
exposure;
|
|
·
|
a
$10 million reversal related to the collection of Argentine restructured
loans during the year; and
|
|
·
|
a
$1 million reversal related to the collection of a Brazilian restructured
loan during the year.
|
The
Bank’s $54 million reversal of provision for loan losses during 2005 was mainly
due to the net effect of:
|
·
|
a
$3 million reversal related to the sale of an Argentine loan with
a
nominal value of $11 million;
|
|
·
|
a
$45 million reversal related to the decrease in Argentine restructured
loans, reflecting payments and prepayments received during the year;
|
|
·
|
a
$13 million reversal related to the decrease in Brazilian restructured
loans, reflecting payments and prepayments received during the
year;
|
|
·
|
a
$3 million reversal due to recoveries from loans charged-off in previous
years;
|
|
·
|
$16
million generic provision charge, due to increased loan exposure;
and
|
|
·
|
a
$6 million reversal due to the change in the credit loss reserve
methodology during 2005.
|
For
detailed information see “Business Overview
—
Allowance for Credit Losses and Asset Quality”.
Commission
Income
The
Bank
generates commission income primarily from originating letters of credit
confirmation, guarantees, country risk coverage, and loans. The following table
shows the components of
the
Bank’s
commission income for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands)
|
|
Letters
of credit
|
|
$
|
3,894
|
|
$
|
3,396
|
|
$
|
4,121
|
|
Guarantees
|
|
|
1,540
|
|
|
2,011
|
|
|
1,419
|
|
Loans
and other
|
|
|
603
|
|
|
464
|
|
|
773
|
|
Commission
Income
|
|
$
|
6,037
|
|
$
|
5,872
|
|
$
|
6,313
|
|
Commission
Expense
|
|
|
(109
|
)
|
|
(48
|
)
|
|
(28
|
)
|
Commission
Income, Net
|
|
$
|
5,928
|
|
$
|
5,824
|
|
$
|
6,285
|
|
The
increase of $461 thousand in commission income, net for 2006, compared to 2005,
reflects mostly a 12% increase in the average volume of letters of
credit.
The
decline of $104 thousand in commission income for 2005 compared to 2004 resulted
mainly from lower pricing in the letter of credit business.
Reversal
(provision) for Losses on Off-Balance Sheet Credit Risk
The
$25
million reversal of provision for losses on off-balance sheet credit risk in
2006 was mainly due to a $15 million reduction in generic reserves driven by
exposure reductions in certain countries and a $10 million reversal in specific
reserves resulting from the maturity of Argentine impaired contingencies.
The
$16
million provision for losses on off-balance sheet credit risk in 2005 was mainly
related to the effect of a change in the credit loss reserve methodology during
2005
.
For
detailed information see “Business Overview
—
Allowance for Credit Losses and Asset Quality”.
Derivatives
and Hedging Activities
During
2005, the Bank recorded income of $2 million mostly related to the unwinding
of
interest rate swaps associated with the sale of securities available for sale.
Impairment
Loss on Securities
For
detailed information see “Business Overview
—
Allowance for Credit Losses and Asset Quality”.
Gain
on the Sale of Securities Available for Sale
From
time
to time, the Bank purchases debt instruments as part of its Treasury activity
with the intention of selling them prior to maturity. These debt instruments
are
classified as securities available for sale and are included as part of the
Bank’s credit portfolio. During 2006, the Bank’s net gain on the sale of
securities available for sale was $3 million related to the sale of securities
available for sale for a nominal amount of $105 million. During 2005 and 2004,
the Bank had gains on the sale of securities available for sale for $206
thousand and $3 million respectively, mostly related to the sale of impaired
Argentine securities.
Operating
Expenses
The
following table shows a breakdown of the components of total operating expenses
for the periods indicated.
|
|
For
the Year Ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands)
|
|
Salaries
and other employee expenses
|
|
$
|
10,335
|
|
$
|
13,073
|
|
$
|
16,826
|
|
Depreciation
|
|
|
1,298
|
|
|
869
|
|
|
1,406
|
|
Professional
services
|
|
|
2,572
|
|
|
3,281
|
|
|
2,671
|
|
Maintenance
and repairs
|
|
|
1,207
|
|
|
1,172
|
|
|
1,000
|
|
Other
operating expenses
|
|
|
5,941
|
|
|
6,295
|
|
|
7,026
|
|
Total
Operating Expenses
|
|
$
|
21,352
|
|
$
|
24,691
|
|
$
|
28,929
|
|
The
$4
million, or 17% increase in operating expenses for 2006 compared to 2005, was
mostly due to higher salary expenses associated with the development of the
corporate segment and the implementation of new business initiatives, including
proprietary asset management, leasing, and digital identity, as well as
increased depreciation expenses related to Bank’s new technology
platform.
The
$3
million, or 16%, increase in operating expenses for 2005 compared to 2004,
was
mostly due to increased expenses associated with the strengthening of the Bank’s
sales team, the adoption of FAS 123R related stock-based compensation expense,
and legal and consulting fees related to new product development and business
initiatives.
Changes
in Financial Condition
The
following table summarizes components on the Bank’s balance sheet at December 31
of each year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands)
|
|
Assets
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
687
|
|
$
|
687
|
|
$
|
401
|
|
Interest-bearing
deposits with banks
|
|
|
154,099
|
|
|
229,200
|
|
|
331,764
|
|
Trading
assets
|
|
|
0
|
|
|
0
|
|
|
130,076
|
|
Investment
securities
|
|
|
192,856
|
|
|
208,570
|
|
|
471,351
|
|
Loans
|
|
|
2,441,686
|
|
|
2,610,019
|
|
|
2,980,772
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
(106,352
|
)
|
|
(39,448
|
)
|
|
(51,266
|
)
|
Unearned
income and deferred loan fees
|
|
|
(7,013
|
)
|
|
(5,577
|
)
|
|
(4,425
|
)
|
Loans,
net
|
|
|
2,328,321
|
|
|
2,564,994
|
|
|
2,925,081
|
|
Customers’
liabilities under acceptances
|
|
|
32,530
|
|
|
110,621
|
|
|
46,006
|
|
Premises
and equipment, net
|
|
|
3,508
|
|
|
3,253
|
|
|
11,136
|
|
Accrued
interest receivable
|
|
|
15,448
|
|
|
30,254
|
|
|
55,238
|
|
Derivative
financial instruments-assets
|
|
|
0
|
|
|
357
|
|
|
541
|
|
Other
assets
|
|
|
5,491
|
|
|
11,295
|
|
|
6,743
|
|
Total
Assets
|
|
$
|
2,732,940
|
|
$
|
3,159,231
|
|
$
|
3,978,337
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
864,160
|
|
|
1,046,618
|
|
|
1,056,277
|
|
Securities
sold under repurchase agreements
|
|
|
82,368
|
|
|
128,599
|
|
|
438,356
|
|
Short-term
borrowings
|
|
|
622,350
|
|
|
632,100
|
|
|
1,157,248
|
|
Medium
and long-term borrowings and placements
|
|
|
403,621
|
|
|
533,860
|
|
|
558,860
|
|
Trading
liabilities
|
|
|
0
|
|
|
0
|
|
|
54,832
|
|
Acceptances
outstanding
|
|
|
32,530
|
|
|
110,621
|
|
|
46,006
|
|
Accrued
interest payable
|
|
|
6,477
|
|
|
14,736
|
|
|
28,420
|
|
Derivative
financial instruments-liabilities
|
|
|
0
|
|
|
297
|
|
|
2,634
|
|
Reserve
for losses on off-balance sheet credit risk
|
|
|
33,101
|
|
|
52,086
|
|
|
27,195
|
|
Redeemable
preferred stock
|
|
|
7,860
|
|
|
5,149
|
|
|
0
|
|
Other
liabilities
|
|
|
24,342
|
|
|
18,383
|
|
|
24,614
|
|
Total
Liabilities
|
|
$
|
2,076,810
|
|
$
|
2,542,449
|
|
$
|
3,394,442
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
Common
stock, no par value
|
|
|
279,978
|
|
|
279,979
|
|
|
279,980
|
|
Capital
surplus
|
|
|
133,785
|
|
|
134,340
|
|
|
134,945
|
|
Capital
reserves
|
|
|
95,210
|
|
|
95,210
|
|
|
95,210
|
|
Retained
earnings
|
|
|
233,701
|
|
|
212,916
|
|
|
205,200
|
|
Accumulated
other comprehensive income (loss)
|
|
|
6,082
|
|
|
619
|
|
|
3,328
|
|
Treasury
stock
|
|
|
(92,627
|
)
|
|
(106,282
|
)
|
|
(134,768
|
)
|
Total
Stockholders’ Equity
|
|
$
|
656,130
|
|
$
|
616,782
|
|
$
|
583,895
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
2,732,940
|
|
$
|
3,159,231
|
|
$
|
3,978,337
|
|
Loans
The
$371
million increase in loans during 2006 reflects the Bank’s new strategy to
diversify its client base, involving principally an increase in its activity
with corporations. The corporate portfolio increased $600 million to represent
45% of the total portfolio, as compared to one third of the portfolio in
2005.
The
$168
million increase in loans during 2005 was mainly attributable to the increase
in
the Bank’s non-trade lending, which offset the reduction in the Bank’s
non-accruing portfolio.
Critical
Accounting Policies
General
The
Bank
prepares its Consolidated Financial Statements in conformity with U.S. GAAP.
As
such, the Bank is required to use methods, make estimates, judgments and
assumptions in applying its accounting policies that have a significant impact
on the results it reports in its Consolidated Financial Statements. Some of
the
Bank’s accounting policies require management to make difficult and subjective
judgments, often as a result of the need to make estimates of matters that
are
inherently uncertain. The Bank’s management bases its estimates on historical
experience and on various other assumptions that it believes to be reasonable
under the circumstances. Actual results may differ from the estimates.
The
Bank’s
most critical accounting
estimates
include the assessment of allowance for credit losses, impairments on the value
of securities that are “other than temporary” and the fair value of financial
instruments. For information regarding the Bank’s most critical accounting
policies see Notes 2, 5, 7 and 20 to the Consolidated Financial Statements.
B.
Liquidity
and Capital Resources
Liquidity
Liquidity
refers to the Bank’s ability to maintain adequate cash flows to fund operations
and meet obligations and other commitments on a timely basis. The Bank maintains
its liquid assets in demand deposits, overnight funds and time deposits with
well-known international banks. These liquid assets are adequate to cover
24-hour deposits from customers, which theoretically could be withdrawn on
the
same day. At December 31, 2006, the Bank’s 24-hour deposits from customers
(overnight deposits, demand deposit accounts and call deposits) amounted to
$132 million, representing 12.5% of the Bank’s total deposits
.
The
liquidity requirement resulting from these maturities is met by the Bank’s
liquid assets, which at December 31, 2006, were $327 million (representing
31% of total deposits), and by daily maturities of approximately $62 million
to
$114 million in the Bank’s loan portfolio.
The
main
objectives of the Bank’s
policy
with respect to liquidity risk are: to achieve diversification of liabilities,
to avoid concentrations (both in clients and maturities), to have adequate
liquid assets levels, and to avoid risky mismatches between assets and
liabilities. The Bank established the following limits: maximum deposits taken
from any client or economic group maturing in one day, and total maximum
deposits maturing in any one day. The Bank also established a limit on the
cumulative maturity gap and a liquidity ratio (a percentage of total
interest-earning assets in highly liquid assets - cash and due from banks,
unpledged deposits with banks and selected investments not used as collateral
for repurchase agreements). Inter-bank deposits are placed with reputable
international banks that have A1, P1, or F1 ratings by two of the major rating
agencies, and are located outside of the Region. These banks must have a
correspondent relationship with the Bank and be approved by the Board on an
annual basis. In addition, the Bank’s liquidity policy allows for investing in
negotiable money market instruments, such as Euro certificates of deposit,
commercial paper, bankers’ acceptances and other liquid instruments with
maturities of up to 180 days. These instruments must be of investment grade
quality (carrying two of the following ratings: A-1, P-1 or F-1 from Standard
& Poor’s, Moody’s or Fitch, respectively) and must have a liquid secondary
market.
The
primary objectives for the investment of the Bank’s liquidity funds are security
and convertibility and the secondary objective is yield. The Bank reviews and
monitors its liquidity position on a daily basis.
The
following table shows the Bank’s liquid assets, which consist of short-term
funds deposited with other banks broken down by principal geographic
area:
|
|
At
December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Europe
|
|
$
|
104
|
|
$
|
189
|
|
$
|
224
|
|
United
States
|
|
|
1
|
|
|
1
|
|
|
49
|
|
Other
O.E.C.D.
|
|
|
45
|
|
|
35
|
|
|
54
|
|
Total
|
|
$
|
151
|
|
$
|
225
|
|
$
|
327
|
|
While
the
Bank’s liabilities generally mature over shorter periods than its assets,
requiring the Bank to renew or create new liabilities at current interest rates,
the associated risk is diminished by the short-term nature of the loan
portfolio. At December 31, 2006, the average original term to maturity of the
Bank’s short-term loan portfolio was approximately 213 days.
At
December 31, 2006, the Bank’s cumulative maturity gap for the subsequent
twelve-month period was positive. This means that the Bank has sufficient asset
maturities in the next twelve months to cover the maturity of its liabilities.
Funding
Sources
The
Bank’s principal sources of funds are deposits, borrowed funds and floating and
fixed rate placements. While these sources are expected to continue to provide
the majority of the funds needed by the Bank in the future, their mix, as well
as the possible use of other sources of funds, will depend upon future economic
and market conditions. The following table shows the Bank’s funding
distribution:
|
|
At
December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
percentages)
|
|
Inter-bank
deposits
|
|
|
41.6
|
%
|
|
41.2
|
%
|
|
31.1
|
%
|
Securities
sold under repurchase agreements
|
|
|
4.0
|
%
|
|
5.1
|
%
|
|
12.9
|
%
|
Short-
and medium-term borrowings and placements
|
|
|
49.4
|
%
|
|
45.9
|
%
|
|
50.6
|
%
|
Other
liabilities.
|
|
|
5.0
|
%
|
|
7.9
|
%
|
|
5.4
|
%
|
Total
liabilities
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Deposits
The
Bank
obtains deposits principally from central and commercial banks in the Region.
At
December 31, 2006, approximately 37% of the deposits held by the Bank were
deposits made by central banks of countries in the Region. Many of these banks
deposit a portion of their dollar reserves with the Bank. The average term
remaining to maturity of deposits from central banks of countries in the Region
at December 31, 2006 and 2005 was 44 days. The bulk of the Bank’s remaining
deposits is obtained primarily from commercial banks located in the Region.
At
December 31, 2006, deposits from the Bank’s five largest depositors, of which
three were central banks in the Region, represented
60%
of the
Bank’s total deposits.
The
following table analyzes the Bank’s deposits by country at December 31 of each
year:
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ millions)
|
|
Argentina
|
|
$
|
75
|
|
$
|
75
|
|
$
|
91
|
|
Barbados
|
|
|
2
|
|
|
10
|
|
|
5
|
|
Brazil
|
|
|
365
|
|
|
424
|
|
|
400
|
|
Cayman
Island
|
|
|
0
|
|
|
0
|
|
|
27
|
|
Chile
|
|
|
5
|
|
|
0
|
|
|
0
|
|
Colombia
|
|
|
32
|
|
|
44
|
|
|
47
|
|
Costa
Rica
|
|
|
46
|
|
|
2
|
|
|
7
|
|
Dominican
Republic
|
|
|
28
|
|
|
22
|
|
|
27
|
|
Ecuador
|
|
|
75
|
|
|
182
|
|
|
99
|
|
El
Salvador
|
|
|
27
|
|
|
32
|
|
|
27
|
|
Finland
|
|
|
0
|
|
|
0
|
|
|
10
|
|
Guatemala
|
|
|
0
|
|
|
0
|
|
|
1
|
|
Germany
|
|
|
45
|
|
|
0
|
|
|
0
|
|
Haiti
|
|
|
2
|
|
|
2
|
|
|
3
|
|
Honduras
|
|
|
20
|
|
|
10
|
|
|
14
|
|
Italy
|
|
|
9
|
|
|
0
|
|
|
0
|
|
Jamaica
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Mexico
|
|
|
90
|
|
|
128
|
|
|
35
|
|
The
Netherlands
|
|
|
0
|
|
|
17
|
|
|
18
|
|
Nicaragua
|
|
|
0
|
|
|
0
|
|
|
2
|
|
Panama
|
|
|
13
|
|
|
15
|
|
|
48
|
|
Paraguay
|
|
|
3
|
|
|
0
|
|
|
0
|
|
Peru
|
|
|
0
|
|
|
5
|
|
|
43
|
|
United
States
|
|
|
0
|
|
|
0
|
|
|
19
|
|
Trinidad
and Tobago
|
|
|
10
|
|
|
11
|
|
|
10
|
|
Venezuela
|
|
|
14
|
|
|
65
|
|
|
121
|
|
Total
|
|
$
|
864
|
|
$
|
1,047
|
|
$
|
1,056
|
|
Short-Term
Borrowings and Placements and Securities Sold Under Repurchase
Agreements
The
Bank’s short-term borrowings consist of borrowings from banks and have
maturities of up to 365 days. These borrowings are made available to the Bank
on
an uncommitted basis for the financing of trade-related loans. Approximately
39
European and North American banks provide these short-term borrowings from
banks.
As
of
December 31, 2006, short-term borrowings amounted to $1,596 million, an increase
of $835 million from December 31 2005. The increase in short-term borrowings
funded the growth in the credit portfolio experienced during the
year
.
The
average term remaining to maturity of short-term borrowings at December 31,
2006
was approximately 102 days. See Note 10 to the Consolidated Financial
Statements.
The
Bank
also enters into repurchase agreements (“repos”) with international banks,
utilizing its investment securities portfolio to secure funding. As of December
31, 2006, repos amounted to $438 million, an increase of $309 million from
December 31, 2005, reflecting the increase in the Bank’s investment securities
portfolio during this period.
The
following table presents information regarding the amounts outstanding under,
and interest rates on, the Bank’s short-term borrowings and placements and
securities sold under repurchase agreements at the dates and during the periods
indicated.
|
|
At
and for the Year Ended December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in $
millions, except percentages)
|
|
Short
term borrowings and Securities sold under repurchase
agreements
|
|
|
|
|
|
|
|
Advances
from banks
|
|
$
|
622
|
|
$
|
608
|
|
$
|
1,147
|
|
Discounted
acceptances
|
|
|
0
|
|
|
24
|
|
|
10
|
|
Securities
sold under repurchase agreements
|
|
|
82
|
|
|
129
|
|
|
438
|
|
Total
short term borrowings and securities sold under repurchase
agreements
|
|
$
|
705
|
|
$
|
761
|
|
$
|
1,596
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
amount outstanding at any month-end
|
|
$
|
705
|
|
$
|
761
|
|
$
|
1,634
|
|
Amount
outstanding at year-end
|
|
$
|
705
|
|
$
|
761
|
|
$
|
1,596
|
|
Average
amount outstanding
|
|
$
|
533
|
|
$
|
601
|
|
$
|
1,044
|
|
Weighted
average interest rate on average amount outstanding
|
|
|
1.74
|
%
|
|
3.39
|
%
|
|
5.20
|
%
|
Weighted
average interest rate on amount outstanding at year end
|
|
|
2.83
|
%
|
|
4.73
|
%
|
|
5.51
|
%
|
Medium-
and Long-Term Borrowings and Placements
The
interest rates on medium and long-term borrowings are adjusted semi-annually
based on short-term LIBOR rates plus a credit spread (which is based on several
factors, including credit ratings, risk perception, and the maturity period).
The Bank uses these funds to finance its medium-term loan portfolio. The average
term remaining to maturity of the Bank’s medium and long-term debt is
two years.
The
Bank’s Euro Medium Term Note Program, or, EMTN Program, has a maximum limit of
$2.3 billion. Notes issued under the EMTN Program are placed in the Euro or
Regulation S or 144A markets, and are general obligations of the Bank. The
EMTN
Program may be used to issue notes with maturities ranging from 90 days up
to a
maximum of 30 years, at fixed or floating interest rates and in various
currencies. The Bank has not actively used the EMTN Program in the past three
years, as it has relied on cheaper interbank funding. As of December 31, 2006,
the total amount outstanding under this program with medium-term maturities
was
$25 million. As part of its interest rate and currency risk management, the
Bank has from time to time, entered into foreign exchange forward and cross
currency contracts and interest rate swaps to hedge the risk associated with
a
portion of the notes issued under its EMTN Program. See Note 11 to the
Consolidated Financial Statements and “Quantitative and Qualitative Disclosure
About Market Risk”.
Cost
and Maturity Profile of Borrowed Funds and Floating and Fixed Rate
Placements
The
following table sets forth certain information regarding the weighted average
cost and the remaining maturities of the Bank’s borrowed funds and floating and
fixed rate placements at December 31, 2006:
|
|
Amount
|
|
Weighted
Average Cost
|
|
|
|
(in $
millions)
|
|
|
|
Short-term
borrowings at fixed interest rate
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
467
|
|
|
5.43
|
%
|
Due
in 31 to 90 days
|
|
|
465
|
|
|
5.50
|
%
|
Due
in 91 to 180 days
|
|
|
390
|
|
|
5.57
|
%
|
Due
in 181 to 365 days
|
|
|
274
|
|
|
5.57
|
%
|
Total
|
|
$
|
1,596
|
|
|
5.51
|
%
|
Medium
and long-term borrowings at fixed interest rate
|
|
|
|
|
|
|
|
Due
in 0 to 30 days
|
|
$
|
1
|
|
|
8.42
|
%
1
|
Due
in 31 to 90 days
|
|
|
3
|
|
|
8.42
|
%
1
|
Due
in 91 to 180 days
|
|
|
4
|
|
|
8.42
|
%
1
|
Due
in 181 to 365 days
|
|
|
48
|
|
|
5.01
|
%
1
|
Due
in 1 through 4 years
|
|
|
49
|
|
|
8.42
|
%
1
|
Total
|
|
$
|
105
|
|
|
6.87
|
%
|
Medium
and long-term borrowings at floating interest rate
|
|
|
|
|
|
|
|
Due
in0 to 30 days
|
|
$
|
1
|
|
|
5.71
|
%
|
Due
in 31 to 90 days
|
|
|
5
|
|
|
5.58
|
%
|
Due
in 91 to 180 days
|
|
|
25
|
|
|
5.90
|
%
|
Due
in 181 to 365 days
|
|
|
74
|
|
|
5.70
|
%
|
Due
in 1 through 4 years
|
|
|
324
|
|
|
5.74
|
%
|
Total
|
|
$
|
429
|
|
|
5.74
|
%
|
Medium
& long-term floating rate placements
|
|
|
|
|
|
|
|
Due
in 1 through 4 years
|
|
$
|
25
|
|
|
6.10
|
%
|
Total
|
|
$
|
25
|
|
|
6.10
|
%
|
1
Represent
fixed rate interest-bearing liabilities booked in local currency, to fund fixed
rate interest-earning assets in the same local currency.
Asset/Liability
Management
The
Bank
seeks to manage its assets and liabilities to reduce the potential adverse
impact on net interest income that could result from interest rate changes.
The
Bank controls interest rate risk through systematic monitoring of maturity
mismatches. The Bank’s investment decision-making takes into account not only
the rates of return and the respective underlying degree of risk, but also
liquidity requirements, including minimum cash reserves, withdrawal and maturity
of deposits and additional demand for funds. For any given period, a matched
pricing structure exists when an equal amount of assets and liabilities are
repriced. An excess of assets or liabilities over these matched items results
in
a “gap” or “mismatch”, as shown in the table under “Interest Rate Sensitivity”
below. A negative gap denotes liability sensitivity and normally means that
a
decline in interest rates would have a positive effect on net interest income,
while an increase in interest rates would have a negative effect on net interest
income. Substantially all of the Bank’s assets and liabilities are denominated
in dollars and, therefore, the Bank has no material foreign exchange
risk.
Interest
Rate Sensitivity
The
following table presents the projected maturities and interest rate adjustment
periods of the Bank’s assets, liabilities and stockholders’ equity based upon
the contractual maturities and adjustment dates at December 31, 2006. The Bank’s
interest-earning assets and interest-bearing liabilities and the related
interest rate sensitivity gap shown in the following table may not reflect
positions in subsequent periods.
|
|
Total
|
|
0-30
Days
|
|
31-90
Days
|
|
91-180
Days
|
|
181-365
Days
|
|
More
than 365 Days
|
|
Non-Interest
Sensitive
|
|
|
|
(in
$ millions, except percentages)
|
|
Interest-earning
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
29.3
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
29.3
|
|
Interest-bearing
deposits with banks
|
|
|
302.9
|
|
|
297.4
|
|
|
5.5
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
|
130.1
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
130.1
|
|
|
0.0
|
|
Available
for Sale Securities
|
|
|
346.2
|
|
|
115.3
|
|
|
13.1
|
|
|
130.9
|
|
|
13.0
|
|
|
73.8
|
|
|
0.0
|
|
Held
to Maturity Securities
|
|
|
125.2
|
|
|
35.1
|
|
|
10.0
|
|
|
80.1
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Loans,
net
|
|
|
2,925.1
|
|
|
522.7
|
|
|
1,294.4
|
|
|
836.5
|
|
|
132.3
|
|
|
194.9
|
|
|
(55.7
|
)
|
Total
interest-earning assets
|
|
|
3,858.7
|
|
|
970.5
|
|
|
1,323.0
|
|
|
1,047.5
|
|
|
145.3
|
|
|
398.8
|
|
|
(26.4
|
)
|
Non-interest
earning assets
|
|
|
112.9
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
112.9
|
|
Other
assets
|
|
|
6.7
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
6.7
|
|
Total
assets
|
|
$
|
3,978.3
|
|
$
|
970.5
|
|
$
|
1,323.0
|
|
$
|
1,047.5
|
|
$
|
145.3
|
|
$
|
398.8
|
|
$
|
93.3
|
|
Interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
$
|
132.1
|
|
$
|
132.1
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
Time
|
|
|
924.1
|
|
|
578.2
|
|
|
317.2
|
|
|
28.8
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Securities
sold under repurchase Agreements
|
|
|
438.4
|
|
|
322.7
|
|
|
115.7
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Short-term
borrowings and placements
|
|
|
1,157.2
|
|
|
144.4
|
|
|
349.2
|
|
|
390.1
|
|
|
273.5
|
|
|
0.0
|
|
|
0.0
|
|
Medium-
and long-term borrowings and placements
|
|
|
558.9
|
|
|
252.0
|
|
|
51.7
|
|
|
129.6
|
|
|
60.4
|
|
|
65.2
|
|
|
0.0
|
|
Trading
Liabilities
|
|
|
54.8
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
54.8
|
|
|
0.0
|
|
Total
interest-bearing liabilities
|
|
|
3,265.6
|
|
|
1,429.4
|
|
|
833.8
|
|
|
548.5
|
|
|
333.9
|
|
|
120.0
|
|
|
0.0
|
|
Non-interest-bearing
liabilities
|
|
|
128.9
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
128.9
|
|
Total
liabilities
|
|
|
3,394.4
|
|
|
1,429.4
|
|
|
833.8
|
|
|
548.5
|
|
|
333.9
|
|
|
120.0
|
|
|
128.9
|
|
Stockholders’
equity
|
|
|
583.9
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
583.9
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
3,978.3
|
|
$
|
1,429.4
|
|
$
|
833.8
|
|
$
|
548.5
|
|
$
|
333.9
|
|
$
|
120.0
|
|
$
|
712.8
|
|
Interest
rate sensitivity gap
|
|
|
|
|
|
(458.9
|
)
|
|
489.2
|
|
|
499.0
|
|
|
(188.5
|
)
|
|
278.8
|
|
|
(619.5
|
)
|
Cumulative
interest rate sensitivity gap
|
|
|
|
|
|
(458.9
|
)
|
|
30.3
|
|
|
529.3
|
|
|
340.7
|
|
|
619.5
|
|
|
|
|
Cumulative
gap as a % of total interest-earning assets
|
|
|
|
|
|
-12
|
%
|
|
1
|
%
|
|
14
|
%
|
|
9
|
%
|
|
16
|
%
|
|
|
|
The
Bank’s interest rate risk is the exposure of earnings (current and potential)
and capital to adverse changes in interest rates and is managed by attempting
to
match the term and repricing characteristics of the Bank’s interest rate
sensitive assets and liabilities. The Bank’s interest rate risk arises from the
Bank’s liability sensitive short-term position, which means that the Bank’s
interest-bearing liabilities reprice more quickly than the Bank’s
interest-earning assets. As a result, there is a potential adverse impact on
the
Bank’s net interest income that might result from interest rate increases. The
Bank’s policy with respect to interest rate risk provides that the Bank
establishes limits with regards to: (i) changes in net interest income due
to a
potential impact given certain movements in interest rates, (ii) changes in
the
amount of available equity funds of the Bank (given a one basis point movement
in interest rates) and (iii) changes in Value-at-Risk (VaR) of the Bank’s
portfolio (the expected maximum loss due to interest rate fluctuations, based
on
statistical analysis of the historical volatility of the Bank’s portfolio). The
Bank also has used interest rate swaps as part of its interest rate risk
management. Interest rate swaps are made either in a single currency or
cross-currency for a prescribed period to exchange a series of interest rate
flows, which involve fixed for floating rate interest payments or vice versa.
Stockholders’
Equity
The
following table presents information concerning the Bank’s capital position at
the dates indicated.
|
|
At
December 31,
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(in
$ thousands)
|
|
Common
stock
|
|
$
|
279,978
|
|
$
|
279,978
|
|
$
|
279,980
|
|
Capital
surplus
|
|
|
133,785
|
|
|
134,340
|
|
|
134,945
|
|
Capital
reserves
|
|
|
95,210
|
|
|
95,210
|
|
|
95,210
|
|
Retained
earnings
|
|
|
233,701
|
|
|
212,916
|
|
|
205,200
|
|
Accumulated
other comprehensive income
|
|
|
6,082
|
|
|
619
|
|
|
3,328
|
|
Treasury
stock
|
|
|
(92,627
|
)
|
|
(106,282
|
)
|
|
(134,768
|
)
|
Total
stockholders’ equity
|
|
$
|
656,130
|
|
$
|
616,782
|
|
$
|
583,895
|
|
The
net
decrease in stockholders’ equity during 2006 was mainly due to the following
factors:
|
·
|
Dividends
paid to common stockholders of $66 million ($27 million paid in quarterly
dividends and $38 million paid in special dividends);
and
|
|
·
|
The
repurchase of $29 million Class E shares pursuant to the Bank’s stock
repurchase program.
|
|
·
|
These
factors were offset by net income for $58 million and higher accumulated
other comprehensive income related to the available for sale
portfolio.
|
The
net
decrease in stockholders’ equity during 2005 was mainly due to the following
factors:
|
·
|
Dividends
paid to common stockholders of $
101
million ($23 million paid in quarterly dividends and $78 million
paid in
special dividends);
|
|
·
|
Lower
accumulated other comprehensive income related to the available for
sale
portfolio; and
|
|
·
|
The
repurchase of $
14
million Class E shares pursuant to the Bank’s stock repurchase
program.
|
|
·
|
These
factors were offset by net income for $80
million.
|
At
December 31, 2006, the Bank had completed the Bank’s $50 million stock
repurchase program, which was commenced in August 2004. See “Dividends” and
“Purchases of Equity Securities by the Issuer and Affiliated
Purchasers”.
Capital
reserves are established by the Bank from retained earnings and are a form
of
retained earnings according to Panamanian banking regulations. Capital reserves
are intended to strengthen the Bank’s capital position. Reductions of these
reserves, for example to pay dividends, require approval of the Board of the
Bank and Panamanian banking authorities. Panamanian banking regulations do
not
require the Bank to maintain any particular level of capital reserves.
At
December 31, 2006, the capital ratio of total stockholders’ equity to total
assets was 14.7%. Although the Bank is not subject to the capital adequacy
requirements of the United States Board of Governors of the Federal Reserve
System (the “Federal Reserve Board”), if the Federal Reserve Board’s fully
phased-in risk-based capital guidelines applied to the Bank, the
Bank
's
ratios
would
have exceeded all applicable capital adequacy requirements. At December 31,
2006, the Bank’s Tier 1 and total capital ratios calculated according to these
guidelines were 24.4% and 25.7%, respectively. The Banking Law (as defined
under
“Information on the Company—Business Overview—Regulation”) in Panama, which
became effective on June 12, 1998, requires the Bank to maintain a minimum
total
capital to risk-weighted asset ratio of 8% (each, as defined in the Banking
Law). At December 31, 2006, the Bank’s total capital to risk-weighted asset
ratio, calculated according to the guidelines of the Banking Law, was 16.0%.
See
“Regulation—Panamanian Law”.
C.
Research
and Development, Patents and Licenses, etc.
Not
applicable.
D.
Trend
Information
The
following are the most important trends, uncertainties and events that are
reasonably likely to materially affect the Bank or that would cause the
financial information disclosed herein not to be indicative of the Bank’s future
operating results or financial condition:
|
·
|
The
effect of changes in global economic conditions, including oil and
other
commodities prices, the U.S. dollar exchange rate, interest rates,
and
slower economic growth in developed countries and trading partners,
and
the effect that these changes may
have on the economic condition of countries in the Region.
|
|
·
|
The
effect that an economic slowdown or political events in large Latin
American countries may have on the Bank’s asset quality, results of
operations and growth prospects.
|
|
·
|
Continued
improvement in risk perception in the Bank’s markets, increased
competition and U.S. dollar liquidity could further pressure spreads
over
LIBOR on the Bank’s accruing portfolio, which in turn, could reduce the
Bank’s net interest spreads.
|
|
·
|
A
downturn in the capital markets or a downturn in investor
confidence.
|
In
addition, see “Risk Factors” for a discussion of the risks the Bank faces, which
could affect the business, results of operations or financial
condition
.
E.
Off-Balance
Sheet Arrangements
In
the
ordinary course of business, to meet the financing needs of its customers,
the
Bank enters into arrangements that are not recognized on its balance sheet.
At
December 31, 2006, the Bank’s off-balance sheet arrangements included stand-by
letters of credit, guarantees (commercial risk and country risk), reimbursement
undertakings and credit commitments (including unused commitments and other
commitments). See Note 16 to the Consolidated Financial Statements. These
arrangements are kept off-balance sheet as long as the Bank does not incur
an
obligation from them or itself become entitled to an asset. A reserve for losses
on off-balance sheet credit risk is recognized on the balance sheet, with the
resulting loss recorded in the income statement.
For
2006,
commission income from off-balance sheet arrangements amounted to $6 million.
For additional information see “Results of Operations - Commission Income”. For
2006, the Bank is committed to invest $2 million ($3 million in 2005) in a
private investment fund whose main objective is generate capital appreciation
in
the long term through the purchase of shares and convertible debt mainly from
Mexican manufacturing corporations or foreign corporations looking to establish
or expand their operations in Mexico.
No
obligations have arisen from variable interest entities as defined in FIN
46R.
The
Bank
has entered into agreements that contain indemnification provisions, such as
indemnification agreements with its executive officers and directors, and
provides indemnity insurance pursuant to which directors and officers are
indemnified or insured against liability or loss under certain circumstances,
including liabilities or related losses arising under the Securities Act and
the
Exchange Act.
F.
Contractual
Obligations and Commercial Commitments
The
following tables set forth information regarding the Bank’s contractual
obligations and commercial commitments as of December 31, 2006.
|
|
Payments
Due by Period
|
|
Contractual
Obligations
|
|
Total
|
|
Less
than 1 year
|
|
1
- 3 years
|
|
3
- 5 years
|
|
More
than 5 years
|
|
|
|
(in
$ millions)
|
|
Medium
and long-term debt obligations
1
|
|
$
|
559
|
|
$
|
145
|
|
$
|
344
|
|
$
|
70
|
|
$
|
0
|
|
Service
agreements
|
|
|
5
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
Leasehold
obligations
|
|
|
4
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
0
|
|
Total
contractual obligations
|
|
$
|
568
|
|
$
|
147
|
|
$
|
346
|
|
$
|
73
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Amount
of Commitment Expiration by Period
|
|
Other
Commercial Commitments
|
|
Total
|
|
Less
than 1 year
|
|
1
- 3 years
|
|
3
- 5 years
|
|
More
than 5 years
|
|
|
|
(in
$ millions)
|
|
Letters
of credit
|
|
$
|
109
|
|
$
|
109
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
Stand-by
letters of credit
|
|
|
158
|
|
|
156
|
|
|
2
|
|
|
0
|
|
|
0
|
|
Guarantees
|
|
|
154
|
|
|
40
|
|
|
81
|
|
|
33
|
|
|
0
|
|
Reimbursements
undertaking
|
|
|
3
|
|
|
3
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Other
commercial commitments
|
|
|
200
|
|
|
97
|
|
|
102
|
|
|
0
|
|
|
2
|
2
|
Total
Commercial Commitments
|
|
$
|
624
|
|
$
|
405
|
|
$
|
184
|
|
$
|
33
|
|
$
|
2
|
|
______________________
1
Certain
debt obligations are subject to covenants that could accelerate the payment
of
these obligations.
2
This
amount is without maturity.
Purchase
Agreements
The
Bank
has signed service agreements with certain vendors that provide services that
are necessary for the ongoing operations of its business and are mainly related
to the maintenance of a new technology platform and telecommunications services.
The terms of these agreements are up to eight years and some can be
re-negotiated for annual or semi-annual price adjustments after the fifth year.
Under the terms of these agreements, the Bank has committed to contractually
specified minimum payments over the contractual periods. See Note 17 to the
Consolidated Financial Statements.
Item
6.
Directors,
Senior Management and Employees
A.
Directors
and Senior Management
Directors
The
following table sets forth certain information concerning the Directors of
the
Bank as of the date of this Annual Report.
Name
|
|
Country
of
Citizenship
|
|
Position
Held with
The
Bank
|
|
Year
Term
Expires
|
|
Age
|
CLASS
A
|
|
|
|
|
|
|
|
|
Guillermo
Güémez García
Deputy
Governor
Banco
de Mexico, Mexico
|
|
Mexico
|
|
Director
|
|
2008
|
|
66
|
Santiago
Perdomo Maldonado
President
Red
Multibanca Colpatria, Colombia
|
|
Colombia
|
|
Director
|
|
2008
|
|
49
|
José
Maria Rabelo
Vice
President of International Wholesale Business
Banco
do Brasil, Brazil
|
|
Brazil
|
|
Director
|
|
2010
|
|
52
|
CLASS
E
|
|
|
|
|
|
|
|
|
Mario
Covo
Chief
Executive Officer
Finaccess
International, Inc., U.S.A.
|
|
U.S.A
|
|
Director
|
|
2008
|
|
49
|
Will
C. Wood
Principal
Kentwood
Associates, U.S.A.
|
|
U.S.A.
|
|
Director
|
|
2009
|
|
67
|
Herminio
Blanco
Chief
Executive Officer
Soluciones
Estratégicas Consultoría, Mexico
|
|
Mexico
|
|
Director
|
|
2010
|
|
56
|
William
Hayes
President
Wellstone
Global Finance, LLC, U.S.A.
|
|
U.S.A.
|
|
Director
|
|
2010
|
|
64
|
Maria
da Graça França
Brazil
|
|
Brazil
|
|
Director
|
|
2010
|
|
58
|
ALL
CLASSES OF COMMON STOCK
|
|
|
|
|
|
|
|
|
Gonzalo
Menéndez Duque
Director
Banco
de Chile, Chile
|
|
Chile
|
|
Chairman
of the Board of Directors
|
|
2009
|
|
58
|
Jaime
Rivera
Chief
Executive Officer
Bladex,
Panama
|
|
Guatemala
|
|
Director
|
|
2009
|
|
54
|
Guillermo
Güémez García
has
served as a Director of the Bank since 1997. Mr. Güémez has served as Deputy
Governor of Banco de Mexico since 1995 and served as a Board Member of the
National Insurance Commission and Casa de Moneda de Mexico since 1995. He has
served as President of the Executive Committee in Grupo Azucarero Mexico, Vice
Chairman of Grupo de Embotelladoras Unidas, S.A. de C. V., Co-Chairman of the
North American Committee and Board Member of Home Mart, S.A. de C.V. from
1993
to
1994
.
Mr.
Güémez served on the Mexican Business Coordinating Council for Nafta in the
capacity of Executive Director from 1991 to 1993. He was employed by Banco
Nacional de Mexico (Banamex) in various capacities from 1974 to 1991, including
Manager for Foreign Currency Funding and International Credits from 1974 to
1978; Representative in London and set up Banco Nacional de Mexico’s branch in
London from 1979 to 1981, Executive Vice President of International Treasury
and
Foreign Exchange, Exchange Controls and Ficorca from 1982 to 1986, Executive
Vice President for International Products and was the founder and President
of
Euromex Casa de Cambio and Euroamerican Capital Corporation from 1986 to 1990.
He has held the positions of, as well as International Operations from 1984
for
Banco Nacional de Mexico. Mr. Güémez was Board Member of the Institute of
International Finance and Board Member and Chairman of the Executive Committee
of the International Mexican Bank Ltd. Prior to that Mr. Güémez was employed by
Bank of America in Mexico as Assistant Representative.
Santiago
Perdomo Maldonado
has
served as a Director of the Bank since 2003. Mr. Perdomo has served as President
of Banco Colpatria - Red Multibanca Colpatria, in Colombia, since May 1999.
Mr.
Perdomo has been employed by Banco Colpatria in various capacities since 1994,
including: as Executive Vice President from November 1998 to April 1999, as
President from September 1994 to October 1998, and as Executive Vice President
of Corporación Colpatria from February 1994 to August 1994. Previously, he was
Manager of Corredora Bursatil from March 1993 to January 1994. Mr. Perdomo
has
also served as Manager of Colpatria Sociedad Administradora from September
1991
to February 1993, and as Manager of Corporate Banking from July 1981 to August
1991.
José
Maria Rabelo
has
served as a Director of the Bank since 2007. Mr. Rabelo has served as Vice
President of International and Wholesale Business in Banco do Brasil since
July
2005. Mr. Rabelo has been employed by Banco do Brasil in various capacities
since 1996, holding the positions of Director of Foreign Trade from 2004 to
2005, General Manager of the Operational Assets Reestructuring Unit from 2003
to
2004, Executive Superintendent of the Credit Unit from 1999 to 2000, Executive
Superintendent of Sao Paulo Business Unit from 1998 to 1999, Executive Manager
of the Credit Function Unit in 1997, Executive Manager of the Distribution
Unit
from 1996 to 1997 and Superintendent of Rio Grande do Norte State Unit in 1996.
Mr. Rabelo was Commercial Director of Aliança do Brasil Insurance Company from
2000 to 2002.
Mario
Covo
has
served as a Director of the Bank since 1999. Mr. Covo is a founding partner
of
Finaccess International, Inc., New York, and has served as the Chairman and
Chief Executive Officer of that company since 1999. Mr. Covo is also one of
the
founders of Columbus Advisors and the Columbus Group, where he worked from
1995
to 1999. Mr. Covo was employed by Merrill Lynch, as Head of Emerging
Markets-Capital Markets, from 1989 to 1995. Previously, he was employed by
Bankers Trust Company as Vice President in the Latin American Merchant Banking
Group from 1985 to 1989, focusing on corporate finance and debt-for-equity
swaps. Prior to that Mr. Covo was employed as an International Economist for
Chase Econometrics from 1984 to 1985, focusing primarily on Venezuela and
Colombia.
Will
Wood
has
served as a Director of the Bank since 1999. Mr. Wood has served as the founding
principal of Kentwood Associates of Menlo Park, California since 1993.
Mr. Wood was employed by Wells Fargo in the International Banking Group and
served as an Executive Vice President from 1986 to 1989. While at Wells Fargo,
he was a Director of the Bankers’ Association for Foreign Trade and PEFCO, a
privately owned export finance company. Mr. Wood was employed by Crocker Bank
and served as Executive Vice President in charge of the International Division
and Manager of the Latin America Area from 1975 to 1986. He worked for Citibank
in La Paz, Bolivia, Lima, Peru, Rio de Janeiro and Sao Paulo, Brazil, and began
his career with Citibank’s Overseas Division in 1964 in New York.
Herminio
Blanco
has
served as a Director of the Bank since 2004. Mr. Blanco has served as Chief
Executive Officer of Soluciones Estratégicas Consultoría, Mexico City since
2002. He has served as a business consultant to some of the leading corporations
in the world, advisor to the Inter-American Development Bank, advisor to
national governments on trade negotiations, a member of the International
Advisory Committee of Mitsubishi Corporation and a member of the Trilateral
Commission since 2000. Mr. Blanco served as Secretary of Trade and Industry,
Chairman of the National Council for Deregulation, Chairman of the Advisory
Council for Trade Negotiations, Chairman of the Board of Exportadora de Sal,
S.A., Chairman of the Board of Fideicomiso de Fomento Minero and Vice Chairman
of the Board of Banco Nacional de Comercio Exterior, in Mexico, from 1994 to
2000. He served as Undersecretary for International Trade and Negotiations
of
the Ministry of Trade and Industry of Mexico, from 1993 to 1994 and from 1988
to
1990. Mr. Blanco served as Mexico’s Chief Negotiator of the North American Free
Trade Agreement (NAFTA), from 1990 to 1993. He served as one of the three
members of Council of Economic Advisors to the President of Mexico from 1985
to
1988. Mr. Blanco served as Assistant Professor of Economics at Rice University,
Houston Texas, from 1980 to 1985. He served as senior advisor to the Finance
Minister of Mexico from 1978 to 1980.
William
Hayes
has
served as a Director of the Bank since 2004. Mr. Hayes has served as President
of Whaleco, Inc., New York, President of Wellstone Global Finance, LLC, San
Francisco, California and Connecticut, and as Charter Member of the Board of
Directors and Investment Committee of WestLB-Tricon Forfaiting Fund Limited,
Bermudas, since 1999. Mr. Hayes served as Managing Director-Emerging Markets
and
in various capacities for West Merchant Bank Limited, London (formerly Standard
Chartered Merchant Bank and Chartered WestLB), from 1987 to 1999. Mr. Hayes
served as Senior Vice President-Trading for Libra Bank Limited, New York Agency,
from 1986 to 1987. He served as Principal of W.D. Hayes and Associates,
California, from 1984 to 1986. He served in various capacities for Wells Fargo
Bank, N.A., San Francisco, California, from 1969 to 1984.
Maria
da Graça França
has
served as a Director of the Bank since 2004. Ms. França served in various
capacities for Banco do Brasil from 1971 until her retirement in May 2007,
including Director of Internal Control of Banco do Brasil, in Brasilia, from
2006 to May 2007, Head of North America and General Manager of Banco do Brasil,
New York Branch from 2004 to 2005, Executive General Manager of the
International Division in Brasilia, Brazil from 2002 to 2003, Regional Manager
for the operations of the Bank in South America, based in Argentina in 2002,
General Manager of Banco do Brasil Paris Branch from 1999 to 2002, Deputy
General Manager of Banco do Brasil Miami Branch from 1993 to 1999, General
Manager of the Department responsible for Banco do Brasil foreign network from
1992 to 1993, Deputy General Manager in charge of the foreign exchange from
1989
to 1992, Assistant Manager within the Risk Management Area from 1988 to 1989,
Assistant Manager at the foreign exchange internal controls from 1984 to 1987
and Foreign Exchange Department from 1971 to 1984.
Gonzalo
Menéndez Duque
has
served as a Director of the Bank since 1990. Mr. Menéndez Duque is a senior
director of the Luksic companies in Chile, and serves as a director of the
following Luksic group holding companies: Banco de Chile since 2001, Holdings
Quiñenco since 1996, and Antofagasta PLC since 1985. In addition, he serves as
President of the following Luksic group companies: Banchile Corredores de Bolsa
S.A. since 2007, and Inversiones Vita since 2000. Previously, Mr. Menéndez Duque
served as a director and President of several companies related to Grupo Luksic
since 1985, including: Banco de A. Edwards and related companies, Banco
Santiago, Empresas Lucchetti, S.A., Banco O’Higgins, Antofagasta Group and
Banchile Administradora General de Fondos.
Jaime
Rivera
has
served as a Director of the Bank since 2004, when he was appointed Chief
Executive Officer of the institution. He joined the Bank in 2002 as Chief
Operating Officer. Previously, Mr. Rivera served in various capacities for
Bank
of America Corporation beginning in 1978, including Managing Director of the
Latin America Financial Institutions Group in Miami and the Latin America
Corporate Finance team in New York, as General Manager in Brazil, Argentina,
Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin
America Information Systems in Venezuela. Mr. Rivera has held Board positions
with the Council of the Americas, the Florida International Bankers’
Association, and the Latin American Agribusiness Development Corporation. Mr.
Rivera is member of the International Advisory Committee (IAC) to the Board
of
Directors of the New York Stock Exchange.
Senior
Management
The
following table and information sets forth the names of the executive officers
of the Bank and their respective positions as of the date hereof and positions
held by them with the Bank and other entities in prior years:
Name
|
|
Position
Held with The Bank
|
|
Country
of Citizenship
|
|
Age
|
|
Jaime
Rivera
|
|
|
Chief
Executive Officer
|
|
|
Guatemala
|
|
|
54
|
|
Rubens
V. Amaral Jr.
|
|
|
Chief
Commercial Officer
|
|
|
Brazil
|
|
|
48
|
|
Ernesto
A. Bruggia
|
|
|
Chief
Operations Officer
|
|
|
Argentina
|
|
|
51
|
|
Miguel
Moreno
|
|
|
Senior
Vice President, Controller
|
|
|
Colombia
|
|
|
54
|
|
Gregory
Testerman
|
|
|
Senior
Managing Director, Treasury and Capital Markets
|
|
|
U.S.A.
|
|
|
44
|
|
Carlos
Yap S.
|
|
|
Senior
Vice President, Chief Financial Officer
|
|
|
Panama
|
|
|
51
|
|
Ana
Maria de Arias
|
|
|
Senior
Vice President, Human Resources and Corporate Operations
|
|
|
Panama
|
|
|
43
|
|
Miguel
A. Kerbes
|
|
|
Senior
Vice President, Chief Risk Officer
|
|
|
Uruguay
|
|
|
47
|
|
Jaime
Rivera
has
served as a Director of the Bank since 2004, when he was appointed Chief
Executive Officer of the institution. He joined the Bank in 2002 as Chief
Operating Officer. Previously, Mr. Rivera served in various capacities for
Bank
of America Corporation beginning in 1978, including Managing Director of the
Latin America Financial Institutions Group in Miami and the Latin America
Corporate Finance team in New York, as General Manager in Brazil, Argentina,
Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin
America Information Systems in Venezuela. Mr. Rivera has held Board positions
with the Council of the Americas, the Florida International Bankers’
Association, and the Latin American Agribusiness Development Corporation. Mr.
Rivera is member of the International Advisory Committee (IAC) to the Board
of
Directors of the New York Stock Exchange.
Rubens
V. Amaral Jr.
became
Chief Commercial Officer of the Bank in March 2004. He served as General Manager
and Managing Director for North America of Banco do Brasil, New York Branch,
since 2000. Mr. Amaral served in various capacities with Banco do Brasil since
1975, holding the positions of Managing Director, International Division and
alternate member of the board of directors in 1998, Executive General Manager
of
the International Division in Sao Paulo from 1994 to 1998, Deputy General
Manager in the New York Branch in charge of the Trade Finance and Correspondent
Banking Department, Head of Staff of the International Division from 1993 to
1994 and Advisor, Head of Department and General Manager in the Trade Finance
Area at the International Department Division - Head Office, from 1989 to 1993.
Mr. Amaral also served as a representative in banking supervision for the
Central Bank of Brazil from 1982 to 1988.
Ernesto
A. Bruggia
became
Chief Operations Officer of the Bank in July 2004. Mr. Bruggia served as Chief
Executive Officer of Banco de la Provincia de Buenos Aires (“BPBA”) from 1999 to
2004 and as Chief Executive Officer of Grupo BAPRO (the holding company of
BPBA)
from 1998 to 2004. Mr. Bruggia served in various capacities with BPBA beginning
in 1976, including Assistant General Manager from 1993 to 1999, Finance and
International Relations Manager from 1992 to 1993, International Operations
Manager from 1990 to 1992, Deputy Manager in charge of International Operations
from 1989 to 1990, Deputy Manager in charge of the International Division in
1985, and Chief of International Audit in 1983. Mr. Bruggia began his career
with BPBA in 1976 in its Stock Exchange Department.
Miguel
Moreno
has
served as Senior Vice President and Controller of the Bank since September
2001.
He was a Management Consulting Partner for Price Waterhouse, Bogotá, Colombia
from 1988 to 2001, and served as Vice President of Information Technology and
Operations for Banco de Crédito, Bogotá, Colombia from 1987 to 1988. Mr. Moreno
served as Chief Executive Officer, TM Ingeniería, Bogotá, Colombia, from 1983 to
1987, and as Head of Industrial Engineering Department, Los Andes University,
Colombia, from 1982 to 1984. Mr. Moreno was employed by SENA, as Chief of the
Organization and Systems Office, Colombia from 1977 to 1981, and served as
Advisor to the Minister for the Finance and Public Credit Ministry of Colombia
from 1976 to 1977.
Gregory
D. Testerman
has
served as Senior Managing Director, Treasury and Capital Markets of the Bank
since 2007. Mr. Testerman previously served as Senior Vice President, Treasury
of the Bank from 2005 to 2006. Mr. Testerman served in various capacities with
Banco Santander Central Hispano, S.A. from 1986 to 2003, including General
Manager, Miami Agency, from 1999 to 2003, General Manager, Tokyo Branch, and
Country Manager in Japan from 1995 to 1999, Vice President, Head of Financial
Control, Benelux and Asia Pacific, from 1991 to 1995, Second Vice President,
Special Credit Valuation Assignment, London Branch, in 1991, Second Vice
President, Treasury Operations Manager, Belgium, from 1989 to 1991, and Second
Vice President, Management Reporting, Belgium, from 1986 to 1989. Mr. Testerman
began his career with The Chase Manhattan Bank, N.A. as Assistant Treasurer
in
Belgium in 1986, and as part of the Corporate Controllers Development Program
in
New York from 1984 to 1986.
Carlos
Yap S.
has
served as Senior Vice President and Chief Financial Officer of the Bank since
July 2002. Mr. Yap previously served as Vice President, Finance, of the Bank
from 1993 to 2002. Prior to this position, Mr. Yap worked for the Bank in the
departments of Institutional Planning, Treasury, Correspondent International
Banking and Capital Markets from 1980 to 1993. Prior to his employment with
the
Bank, Mr. Yap worked for Banco Nacional de Panama in its Credit Department
from
1979 to 1980, Azucarera Nacional, S.A. and the Panama Canal Company from 1977
to
1979.
Ana
María de Arias
has
served as Senior Vice President of Human Resources and Corporate Operations
of
the Bank since June 2004. Prior to her employment with the Bank, she served
as
Vice President of Human Resources of Banco General, S.A., Panama, from 2000
to
2004, and as Assistant Vice President of Human Resources from 1999 to 2000.
She
served in various capacities with the Panama Canal Commission, Panama, from
1990
to 1999.
Miguel
A. Kerbes
has
served as the Senior Vice President and Chief Risk Officer of the Bank since
July 2002. Mr. Kerbes previously served as Vice President, Risk Management,
of
the Bank from 2000 to 2002. He served as the Assistant Credit Director for
the
Southern Cone Area of Banco Santander-Chile from 1995 to 2000. Mr. Kerbes also
served as the Head of Credit Division at Banco Boston, Chile, from 1992 to
1995,
and was employed by ING Bank in various capacities from 1982 to
1992.
B.
Compensation
Cash
and Stock-Based Compensation
Executive
Officers Compensation
The
aggregate amount of cash compensation paid by the Bank during the year ended
December 31, 2006 to the executive officers of the Bank as a group, including
the Bank's chief executive officer, for services in all capacities was
$2,479,891. During the fiscal year ended December 31, 2006, the Bank accrued,
and in February 2007 paid, performance-based bonuses to the Bank’s executive
officers, including the Bank's chief executive officer, in the aggregate amount
of $1,171,000. At December 31, 2006, the total amount set aside or accrued
by
the Bank to provide pension, retirement or similar benefits for executive
officers was approximately $629,457.
The
aggregate number of stock options awarded during the year ended December 31,
2006 to executive officers and other non-executive officers of the Bank as
a
group under the Bank’s indexed stock option plan (the “Indexed Stock Option
Plan”) was 198,528, representing a total compensation cost of $928,005, of which
$212,933 was charged against income in 2006, and $715,072 will be charged to
income over a period of 3.1 years. The options granted have a vesting period
of
four years and are granted based on the level of achievement by the Bank’s
executive officers measured against established corporate financial performance
goals. The Indexed Stock Option Plan was terminated by the Board in April
2006.
The
Bank
sponsors a defined contribution plan for its expatriate officers. The Bank’s
contributions are determined as a percentage of the eligible officer’s annual
salary, with each officer contributing an additional amount withheld from his
salary and deposited in a savings account with the Bank, earning interest at
market rates. During the years 2006, 2005, and 2004, the Bank charged to
salaries expense $259,534, $165,188 and $178,626, respectively, with respect
to
this plan. As of December 31, 2006 and 2005, the accumulated liability payable
under this contribution plan amounted to $743,373, and $483,839,
respectively.
2006
CEO Compensation
The
2006
compensation of the Bank's chief executive officer included a base salary of
$300,000, a performance-based cash bonus of $230,000, a performance-based
indexed stock option grant with a value of $249,000, a retirement plan that
included a contribution from the Bank of $30,003, and executive perquisites
of
$5,769. During the fiscal year ended December 31, 2006, the Bank accrued, and
in
February 2007 paid, performance-based bonus to the Bank’s CEO in the aggregate
amount of $286,000. At December 31, 2006, the total amount set aside or accrued
by the Bank to provide pension, retirement or similar benefits for the CEO
was
approximately $220,555. In addition, the CEO has a contractual severance payment
in case of termination without cause of $300,000.
Board
of Directors Compensation
As
part
of the Bank’s compensation plan, each non-employee director of the Bank is
eligible to receive an annual amount of up to $30,000 for his services as a
director and an additional amount of $1,500 for each meeting of the Board and
each stockholders meeting attended, and $1,000 for each Board Committee meeting
attended. The Chairman of the Board is eligible to receive an additional 50%
of
the compensation that other directors are eligible to receive. The Chairman
of
each Committee of the Board is eligible to receive an additional amount of
$500
for each Board Committee meeting attended. The aggregate amount of cash
compensation paid by the Bank during the year ended December 31, 2006 to the
directors of the Bank as a group for their services as directors was $713,000.
The
aggregate number of restricted stock awarded during the year ended December
31,
2006 to non-employee directors of the Bank as a group under the Bank’s
restricted stock plan (the “Board Restricted Stock Plan”) was 5,967 Class E
shares and compensation expense charged against income in 2006 relating to
such
issuances was $94,875. Under this plan, each non-employee director of the Bank
is awarded annually a number of shares of class E common stock equal to the
number that results from dividing $10,000 ($15,000 in the case of the Chairman
of the Board) by the market price of a class E share on the date the award
is
made.
The
aggregate number of stock options awarded during the year ended December 31,
2006 to non-employee directors of the Bank as a group under the Indexed Stock
Option Plan was 18,182 representing a compensation cost of $84,990, of which
$19,501 was charged against income in 2006, $65,489 will be charged to income
over a period of 3.1 years.
For
a
detailed description of the Board Restricted Stock Plan and other discontinued
stock based compensation plans, see Note 14 to the Consolidated Financial
Statements.
2006
Stock Option Plan
On
December 12, 2006, the Board adopted the 2006 Stock Option Plan. The maximum
aggregate number of shares, which may be issued under the 2006 Stock Option
Plan, is two million Class E common shares. On an annual basis, the 2006 Stock
Option Plan allows directors to receive stock options for an equivalent amount
of $10,000, and for the Chairman of the Board, an equivalent amount to $15,000.
The Board, with the recommendation and advice of the Nomination and Compensation
Committee, may authorize the grant of options to any one or more key employees
of the Bank, as well as determine or impose conditions upon the grant or
exercise of stock options under the Plan.
The
stock
options expire seven years after the date of grant and, except as otherwise
provided in the award agreement, shall be exercisable beginning on the fourth
anniversary of the date of grant. However, in no event will the exercise price
of a stock option be less than 100% the fair market value per share subject
to
the stock option on the date the stock option was granted.
At
December 31, 2006 no grants had been made under this plan. On February 13,
2007,
the Board granted 20,131 stock options to non-employee directors and 188,634
stock options to key employees, representing a compensation cost of $94,976
and
$889,956, respectively. This cost will be charged to income over a period of
four years.
Beneficial
Ownership
As
of
December 31, 2006, the Bank’s executive officers and directors, as a group,
owned an aggregate of
34,306
Class E
shares, which was approximately 0.1% of all issued and outstanding Class E
shares.
The
following tables set forth information regarding the number of shares owned
by
the Bank’s executive officers and options and rights held as of December 31,
2006.
Name
and Position of
Executive
Officer
|
|
Number
of Shares Beneficially Owned as of Dec. 31, 2006
|
|
Number
of Shares that may be Acquired within 60 days of Dec. 31,
2006
|
|
Stock
Options
1
|
|
Deferred
Equity Units
2
|
|
Indexed
Stock Options
|
|
Jaime
Rivera
Chief
Executive Officer
|
|
|
1,400
|
|
|
0
|
|
|
52,989
|
|
|
770
|
|
|
155,709
|
|
Rubens
V. Amaral Jr.
Chief
Commercial Officer
|
|
|
0
|
|
|
0
|
|
|
26,494
|
|
|
0
|
|
|
102,638
|
|
Ernesto
A. Bruggia
Chief
Operations Officer
|
|
|
2,155
|
|
|
0
|
|
|
15,896
|
|
|
0
|
|
|
37,992
|
|
Miguel
Moreno
Senior
Vice President, Controller
|
|
|
2,000
|
|
|
0
|
|
|
10,597
|
|
|
597
|
|
|
35,757
|
|
Gregory
Testerman
Senior
Managing Director, Treasury and Capital Markets
|
|
|
0
|
|
|
0
|
|
|
21,195
|
|
|
0
|
|
|
20,998
|
|
Carlos
Yap S
Senior
Vice President, Chief Financial Officer
|
|
|
0
|
|
|
27,163
|
|
|
27,163
|
|
|
545
|
|
|
26,574
|
|
Ana
Maria de Arias
Senior
Vice President, Human Resources and Corporate Operations
|
|
|
590
|
|
|
0
|
|
|
10,597
|
|
|
0
|
|
|
21,176
|
|
Miguel
A. Kerbes
Senior
Vice President, Chief Risk Officer
|
|
|
0
|
|
|
3,750
|
|
|
19,646
|
|
|
621
|
|
|
29,380
|
|
Total
|
|
|
6,145
|
|
|
30,913
|
|
|
184,577
|
|
|
2,533
|
|
|
430,674
|
|
______________________
1
|
Includes
153,664 stock options granted to executive officers on February 13,
2007,
under the 2006 Stock Option Plan, and 30,913 stock options granted
under
the Bank’s 1995 and 1999 Stock Option Plans. On February 13, 2007, an
aggregate of 34,970 stock options were granted to other non-executive
officers under the 2006 Stock Option Plan.
|
2
|
Deferred
equity units granted under the Bank’s Deferred Compensation Plan (DC
Plan). In addition, as of the date hereof, there are 1,894 units
outstanding under the DC Plan that were granted to former executive
officers of the Bank.
|
The
following table sets forth information regarding ownership of the Bank’s shares
by members of its Board, restricted shares held under the Board Restricted
Stock
Plan and options received under the Indexed Stock Option Plan, as of December
31, 2006
.
Name
of
Director
|
|
Number
of Shares Beneficially Owned as of Dec. 31, 2006
1
|
|
Number
of Shares that may be Acquired within 60 days of Dec. 31,
2006
|
|
Stock
Options
2
|
|
Restricted
Shares
3
|
|
Indexed
Stock Options
|
|
Maria
da Graça França
4
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Guillermo
Güémez García
5
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Santiago
Perdomo Maldonado
|
|
|
2,850
|
|
|
0
|
|
|
2,119
|
|
|
2,850
|
|
|
5,960
|
|
Will
C. Wood
|
|
|
4,850
|
|
|
0
|
|
|
2,119
|
|
|
2,850
|
|
|
5,960
|
|
Mario
Covo
|
|
|
2,850
|
|
|
0
|
|
|
2,119
|
|
|
2,850
|
|
|
5,960
|
|
Herminio
Blanco
|
|
|
1,845
|
|
|
0
|
|
|
2,119
|
|
|
1,845
|
|
|
5,960
|
|
William
Hayes
|
|
|
9,645
|
|
|
0
|
|
|
2,119
|
|
|
1,845
|
|
|
5,960
|
|
Alexandre
Lodygensky Jr
6
|
|
|
1,845
|
|
|
0
|
|
|
2,119
|
|
|
1,845
|
|
|
5,960
|
|
Gonzalo
Menéndez Duque
|
|
|
4,276
|
|
|
0
|
|
|
3,179
|
|
|
4,276
|
|
|
8,942
|
|
Total
|
|
|
28,161
|
|
|
0
|
|
|
15,893
|
|
|
18,361
|
|
|
44,702
|
|
______________________
1
|
Includes
Class E shares held under the Board Restricted Stock Plan.
|
2
|
Stock
options granted on February 13, 2007, under the 2006 Stock Option
Plan.
|
3
|
Under
this plan, Directors receiving restricted shares will have all the
rights
of stockholders of the Bank (including voting and dividend rights),
except
that all such shares will be subject to restrictions on transferability,
which will lapse on the fifth anniversary of the award
date.
|
4
|
1,845
Class E shares corresponding to Ms. França’s entitlement under the Board
Restricted Stock Plan have been issued to her employer, Banco do
Brasil.
In addition, an aggregate number of 5,960 indexed options to which
Ms.
França was entitled under the Indexed Stock Option Plan have been granted
to Banco do Brasil and an aggregate number of 2,119 stock options
to which
Ms. França was entitled under the 2006 Stock Option Plan have been granted
to Banco do Brasil.
|
5
|
2,850
Class E shares corresponding to Mr. Güémez’s entitlement under the Board
Restricted Stock Plan have been issued to his employer, Banco de
Mexico.
In addition, an aggregate number of 2,119 stock options to which
Mr.
Guémez was entitled under the 2006 Stock Option Plan have been granted
to
Banco de Mexico.
|
6
|
Mr.
Lodygensky´s term as a Class E expired in April 2007 and he did not stand
for re-election.
|
For
additional information regarding stock options granted to executive officers
and
directors, see Note 14 to the Consolidated Financial
Statements.
C.
Board
Practices
Corporate
Governance
The
Board
has decided not to constitute a corporate governance committee. Given the
importance that corporate governance has for the Bank, the Board decided to
address all matters related to corporate governance at the Board level. The
Audit and Compliance Committee is responsible for promoting continued
improvement in the Bank’s corporate governance and to verify compliance with all
applicable policies.
The
Bank
has included the information regarding its corporate governance practices
necessary to comply with Section 303A of the New York Stock Exchange's
Listed Company Manual/Corporate Governance Rules on its website
(www.blx.com/Investors Center/ Corporate Governance). Additionally, the Bank’s
website (under “Corporate Governance”) provides a summary of the significant
differences between corporate governance practices commonly used by the Bank
and
other public companies in Panama and the NYSE Standards for U.S. domestic
companies.
Stockholders,
employees of the Bank, and other interested parties may communicate directly
with the Board by corresponding to the address below. Relevant correspondence
will be discussed at the next scheduled meeting of the Board, or as indicated
by
the urgency of the matter.
Attn:
Board of Directors of Banco Latinoamericano de Exportaciones, S. A.
c/o
Mr.
Gonzalo Menéndez Duque, Director & Chairman of the Board of
Directors
Privileged
& Confidential
P.O.
Box
0819-08730
Panama,
Republic of Panama
In
addition, Bladex has selected EthicsPoint to provide stockholders, employees
of
the Bank, and other interested parties with an alternative channel to report
anonymously actual or possible violations of the Bank’s Code of Ethics, as well
as other work-related situations or irregular or suspicious transactions,
accounting matters, internal audit or accounting controls. In order to file
a
report, a link is provided in the Bank’s website (www.blx.com/Investors
Center/Corporate Governance), under Private Filing of Reports.
Information
as to “Dignatarios”
The
following table sets forth the names, countries of citizenship, and ages of
the
Bank’s
dignatarios
,
their
current office or position with other institutions and their current office
or
position with the Bank.
Dignatarios
are
elected annually by the members of the Board.
Dignatarios
attend
meetings of the Board, participate in discussions and offer advice and counsel
to the Board, but do not have the power to vote (unless they also are directors
of the Bank).
Name
|
|
Country
of Citizenship
|
|
Position
held by
Dignatario
with
the Bank
|
|
Age
|
|
Gonzalo
Menéndez Duque
1
|
|
|
Chile
|
|
|
Chairman
of the Board
|
|
|
58
|
|
Jaime
Rivera
|
|
|
Guatemala
|
|
|
Chief
Executive Officer
|
|
|
54
|
|
Maria
da Graça França
|
|
|
Brazil
|
|
|
Treasurer
|
|
|
58
|
|
Ricardo
Manuel Arango
|
|
|
Panama
|
|
|
Secretary
|
|
|
46
|
|
______________________
1
Mr.
Gonzalo Menéndez Duque was re-elected Chairman in April 2007 by the
Board.
Committees
of the Board of Directors
The
Board
conducts its business through meetings of the Board and through its Committees.
During
the
fiscal year ended December 31, 2006, the Board held 13 meetings. Each director
attended an average of 93
%
of the
total number of Board meetings held during the fiscal year ended December 31,
2006.
The
following table sets forth the four Committees established by the Board, the
current number of members of each Committee and the total number of meetings
held by each Committee during the fiscal year ended December 31,
2006:
Committee
|
|
Number
of members
|
|
Total
number of meetings held
|
|
Audit
and Compliance Committee
|
|
|
4
|
|
|
10
|
|
Credit
Policy and Risk Assessment Committee
|
|
|
5
|
|
|
5
|
|
Assets
and Liabilities Committee
|
|
|
5
|
|
|
6
|
|
Nomination
and Compensation Committee
|
|
|
4
|
|
|
5
|
|
The
Bank
has included the charters of its four Committees established by the Board on
its
website www.blx.com/Investors Center/Corporate Governance.
Audit
and Compliance Committee
The
Audit
and Compliance Committee is a standing committee of the Board. According to
its
Charter, the Audit and Compliance Committee must be comprised of at least three
directors. The current members of the Audit and Compliance Committee are Will
C.
Wood (Chairman of the Audit and Compliance Committee), Gonzalo Menéndez Duque,
Santiago Perdomo Maldonado and Maria da Graça França.
The
Board
has determined that all members of the Audit and Compliance Committee are
independent directors, as defined by applicable laws and regulations, including
rules promulgated by the U.S. Securities and Exchange Commission under the
Sarbanes-Oxley Act of 2002, Section 303A of the rules of the New York Stock
Exchange, and Agreement No. 04-2001 of the Superintendency of Banks of the
Republic of Panama. In addition, at least one of the members of the Committee
is
a “financial expert,” as defined in the rules enacted by the U.S. Securities and
Exchange Commission under the Sarbanes-Oxley Act of 2002.
The
Audit
and Compliance Committee meets at least six times a year, as required by the
Superintendency of Banks of Panama, or more often if the circumstances so
require. During the fiscal year ended December 31, 2006, the Audit and
Compliance met ten times. The Audit and Compliance Committee pre-approved all
audit and non-audit services.
The
Audit
and Compliance Committee reviewed and recommended to the Board that the audited
consolidated financial statements of the Bank for the year ended
December 31, 2006 be included in the Bank’s Annual Report.
The
purpose of the Audit and Compliance Committee is to provide assistance to the
Board in fulfilling its oversight responsibilities regarding the processing
of
the Bank’s financial information, the integrity of the Bank’s financial
statements, the Bank’s system of internal controls over financial reporting, the
process of internal and external audit, the Bank’s corporate governance,
compliance with legal and regulatory requirements and the Bank’s ethics
code.
The
Audit
and Compliance Committee, in its capacity as a Committee of the Board, is
directly responsible to make recommendations to the Board regarding the
appointment of the Bank’s independent auditors. The Audit and Compliance
Committee recommended to the Board to replace KPMG as its current external
independent auditors, and also recommended the appointment of Deloitte as the
Bank’s new external independent auditors for the fiscal year ending
December 31, 2007. This committee is also responsible for the compensation
and oversight of the Bank’s independent auditors, including the resolution of
disagreements regarding financial reporting between the Bank’s management and
such independent auditors. The Bank’s independent auditors are required to
report directly to the Audit and Compliance Committee.
The
Charter of the Audit and Compliance Committee requires an annual self-evaluation
of the Committee’s performance. See Item “Audit and Compliance Committee
Financial Expert and Principal Accountant Fees and Services”.
Credit
Policy and Risk Assessment Committee (“CPER”)
The
CPER
is a standing committee of the Board. No member of the CPER can be an employee
of the Bank. The Board has determined that all members of the CPER are
independent. The current members of the CPER are Guillermo Güémez García
(Chairman of the Committee), Gonzalo Menéndez Duque, Will C. Wood, Herminio
Blanco, and José Maria Rabelo.
The
CPER
is in charge of reviewing and recommending to the Board all credit policies
and
procedures related to the management of the Bank’s risks. It also reviews the
quality and profile of the Bank’s credit facilities, and the risk levels that
the Bank is willing to assume. The Committee’s responsibilities also include,
among others, the review of operational and legal risks, the presentation for
Board approval of country limits and limits exceeding delegated authority,
and
the approval of exemptions to credit policies.
The
Committee performs its duties through the review of periodical reports from
the
Bank’s Risk Management, and by way of its interaction with the Chief Risk
Officer and other members of the Bank’s management team. The Committee meets at
least four times per year. During the fiscal period ended December 31, 2006,
the
Committee held five meetings.
Assets
and Liabilities Committee
The
Assets and Liabilities Committee is a standing committee of the Board. No member
of the Assets and Liabilities Committee can be an employee of the Bank. The
Board has determined that all members of the Assets and Liabilities Committee
are independent directors. The current members of the Assets and Liabilities
Committee are Mario Covo (Chairman of the Committee), Herminio Blanco, Guillermo
Güémez García, José Maria Rabelo, and William Hayes.
The
Assets and Liabilities Committee is responsible for reviewing and recommending
to the Board all policies and procedures related to the Bank’s management of
assets and liabilities to meet profitability, liquidity, and market risk control
objectives. As part of its responsibilities, the Committee reviews and
recommends to the Board, among others, policies related to the Bank’s funding,
interest rate and liquidity gaps, investment of liquidity, derivative positions,
funding strategies, and market risk.
The
Assets and Liabilities Committee carries out its duties by reviewing periodic
reports that it receives from management, and by way of its interaction with
the
Senior Managing Director, Treasury and Capital Markets and other members of
the
Bank’s management team. The Committee meets at least four times per year. During
the fiscal year ended December 31, 2006, the Committee held six
meetings.
Nomination
and Compensation Committee
The
Nomination and Compensation Committee is a standing committee of the Board.
No
member of the Nomination and Compensation Committee can be an employee of the
Bank. The Board has determined that all members of the Nomination and
Compensation Committee are independent, under the terms defined by applicable
laws and regulations, including rules promulgated by the U.S. Securities and
Exchange Commission under the Sarbanes-Oxley Act of 2002, Section 303A of the
rules of the New York Stock Exchange, and Agreement No.04-2001 of the
Superintendency of Banks of the Republic of Panama. The current members of
the
Nomination and Compensation Committee are Maria da Graça França (Chairman of the
Committee), Mario Covo, Santiago Perdomo Maldonado, and William Hayes.
The
Committee meets at least four times per year. During the fiscal year ended
December 31, 2006, the Committee held five meetings.
The
Nomination and Compensation Committee’s primary responsibilities are to assist
the Board by identifying candidates to become Board members, and recommending
nominees for the annual meetings of stockholders; by making recommendations
to
the Board concerning candidates for Chief Executive Officer and other senior
management, and counseling on succession planning for senior management; by
recommending compensation for Board members and Committee members, including
cash and equity compensation; by recommending compensation for senior management
and employees of the Bank, including cash and equity compensation, and policies
for senior management and employee benefit programs and plans; and by reviewing
and recommending changes to the Bank’s Code of Ethics; and by advising senior
management on issues related to the Bank’s personnel.
The
Charter of the Nomination and Compensation Committee requires an annual
self-evaluation of the Committee’s performance.
Advisory
Council
The
Advisory Council was created by the Board in April 2000 pursuant to the powers
granted to the Board under the Bank’s Articles of Incorporation. The duties of
Advisory Council members consist primarily of providing advice to the Board
with
respect to the business of the Bank in their areas of expertise. Each member
of
the Advisory Council receives $5,000 for each Advisory Council meeting attended.
The aggregate amount of fees for services rendered by the Advisory Council
during 2006 amounted to $15,000. During the fiscal year ended December 31,
2006,
the Advisory Council met once. The Advisory Council meets when convened by
the
Board.
The
following table sets forth the names, positions, countries of citizenship and
ages of the members of the Advisory Council of the Bank
.
Name
|
|
Position
|
|
Country
of Citizenship
|
|
Age
|
|
Roberto
Teixeira da Costa
|
|
|
Board
Member
Sul
America, S.A.
|
|
|
Brazil
|
|
|
72
|
|
Carlos
Martabit
|
|
|
General
Manager, Finance Division
Banco
del Estado de Chile
|
|
|
Chile
|
|
|
53
|
|
Alberto
Motta, Jr
|
|
|
Vice
President
Inversiones
Bahia Ltd.
|
|
|
Panama
|
|
|
60
|
|
Enrique
Cornejo
|
|
|
Executive
President
Banco
de la Nación - Peru
|
|
|
Peru
|
|
|
50
|
|
D.
Employees
As
of
December 31, 2006, the total number of permanent employees was 171, which were
geographically distributed as follows: Head Office in Panama: 139; New York
Agency: 8;
Bladex
Asset Management
:
2;
Representative Office in Argentina: 2; Representative Office in Brazil: 10;
Representative Office in Mexico: 4; and an International Administrative Office
in Miami: 6.
E.
Share
Ownership
See
“Beneficial Ownership” and
“Compensation”
.
Item
7.
Major
Shareholders and Related Party Transactions
A.
Major
Shareholders
As
of
December 31, 2006, the Bank was not directly or indirectly owned or controlled
by another corporation or any foreign government, and no person was the
registered owner of more than 11.1% of the total outstanding shares of voting
capital stock of the Bank
.
The
following table sets forth information regarding the Bank’s stockholders that
are the beneficial owners of 5% or more of any one class of the Bank’s voting
stock, at December 31, 2006
:
|
|
At
December 31,
|
|
|
|
Number
of Shares
|
|
%
of Class
|
|
%
of Total
|
|
Class
A
|
|
|
|
|
|
|
|
Banco
de la Nación Argentina
|
|
|
1,045,348.00
|
|
|
16.5
|
|
|
2.9
|
|
Banco
do Brasil
1
|
|
|
974,551.00
|
|
|
15.4
|
|
|
2.7
|
|
Banco
de Comercio Exterior de Colombia
|
|
|
488,547.00
|
|
|
7.7
|
|
|
1.3
|
|
Banco
de la Nación (Perú)
6
|
|
|
446,556.00
|
|
|
7.0
|
|
|
1.2
|
|
Banco
Central del Paraguay
|
|
|
434,658.00
|
|
|
6.9
|
|
|
1.2
|
|
Banco
Central del Ecuador
|
|
|
431,217.00
|
|
|
6.8
|
|
|
1.2
|
|
Banco
del Estado de Chile
|
|
|
323,412.75
|
|
|
5.1
|
|
|
0.9
|
|
Sub-total
shares of Class A Common Stock
|
|
|
4,144,289.75
|
|
|
65.4
|
|
|
11.4
|
|
Total
Shares of Class A Common Stock
|
|
|
6,342,189.16
|
|
|
100.0
|
%
|
|
17.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Class
B
|
|
Number
of Shares
|
|
%
of Class
|
|
%
of Total
|
|
Banco
de la Provincia de Buenos Aires
.
|
|
|
884,460.98
|
|
|
32.5
|
|
|
2.4
|
|
Banco
de la Nación Argentina
|
|
|
295,944.50
|
|
|
10.9
|
|
|
0.8
|
|
The
Korea Exchange Bank
|
|
|
147,172.50
|
|
|
5.4
|
|
|
0.4
|
|
Sub-total
shares of Class B Common Stock
|
|
|
1,327,577.98
|
|
|
48.8
|
|
|
3.6
|
|
Total
Shares of Class B Common Stock
|
|
|
2,725,387.37
|
|
|
100.0
|
%
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Class
E
2
|
|
Number
of Shares
|
|
%
of Class
|
|
%
of Total
|
|
Oppenheimer
Funds Inc
|
|
|
4,034,215.00
|
|
|
14.8
|
|
|
11.1
|
|
Brandes
Investment Partners, LP
|
|
|
3,134,771.00
|
|
|
11.5
|
|
|
8.6
|
|
Franklin
Resources Inc
|
|
|
2,625,200.00
|
|
|
9.6
|
|
|
7.2
|
|
Mondrian
Investment Partners Ltd
|
|
|
2,617,700.00
|
|
|
9.6
|
|
|
7.2
|
|
Arnhold
& S. Bleichroeder Advisers, LLC
|
|
|
2,550,510.00
|
|
|
9.4
|
|
|
7.0
|
|
Porter
Orlin LLC
|
|
|
2,016,300
|
|
|
7.4
|
|
|
5.6
|
|
Capital
Research and Management Co
|
|
|
1,475,000.00
|
|
|
5.4
|
|
|
4.1
|
|
Sub-total
shares of Class E Common Stock
|
|
|
18,453,696.00
|
|
|
67.7
|
|
|
50.8
|
|
Total
Shares of Class E Common Stock
|
|
|
27,261,495.00
|
|
|
100.0
|
|
|
75.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Shares of Common Stock
|
|
|
36,329,071.53
|
|
|
|
|
|
100.0
|
|
______________________
1
|
Does
not include an aggregate of 1,845 Class E shares corresponding
to Mrs.
França’s entitlement under the Board Restricted Stock Plan issued to her
employer, Banco do Brasil and an aggregate of 5,960 indexed options
to
which Mrs. França was entitled under the Indexed Stock Option Plan granted
to Banco do Brasil, and an aggregate number of 2,119 stock options
to
which Ms. França was entitled under the 2006 Stock Option Plan granted to
Banco do Brasil
|
2
|
Source:
Schedule 13G and 13F filings with the U.S. Securities and Exchange
Commission dated December 31,
2006.
|
All
common shares have the same rights and privileges regardless of their class,
except that:
|
·
|
The
affirmative vote of three-quarters (3/4) of the issued and outstanding
Class A shares is required (A) to dissolve and liquidate the Bank,
(B) to
amend certain material provisions of the Amended and Restated Articles
of
Incorporation, (C) to merge or consolidate the Bank with another
entity
and (D) to authorize the Bank to engage in activities other than
those
described as the purposes of the Bank in its Amended and Restated
Articles
of Incorporation;
|
|
·
|
The
Class E shares and the preferred shares are freely transferable,
while the
Class A shares and Class B shares can only be transferred to qualified
holders;
|
|
·
|
The
Class B shares may be converted into Class E shares;
|
|
·
|
The
holders of Class A shares and Class B shares benefit from pre-emptive
rights, but the holders of Class E common shares do not;
and
|
|
·
|
The
classes vote separately for their respective
Directors.
|
B.
Related
Party Transactions
Certain
directors of the Bank are executive officers and/or directors of banks and/or
other financial institutions located in Latin America, the Caribbean and
elsewhere. Some of these banks and/or other financial institutions own shares
of
the Bank’s common stock and have entered into loan transactions with the Bank in
the ordinary course of business. The terms and conditions of such loan
transactions, including interest rates and collateral requirements, are
substantially the same as the terms and conditions of comparable loan
transactions entered into with other persons under similar market conditions.
As
a matter of policy, directors of the Bank do not participate in the approval
process for credit facilities extended to institutions of which they are
executive officers or directors nor do they participate with respect to
decisions regarding country exposure limits in countries in which such
institutions are domiciled.
At
December 31, 2006, the Bank did not have any outstanding credit exposure with
related parties as defined by the Panamanian Superintendency of
Banks.
C.
Interests
of Experts and Counsel
Not
required in this Annual Report.
Item
8.
Financial
Information
A.
Consolidated
Statements and Other Financial Information
The
information included in Item 18 of this Annual Report is referred to and
incorporated by reference into this Item 8.A.
Dividends
The
Board’s policy is to distribute quarterly cash dividends on the Bank’s common
stock, and, from time to time has declared special dividends to its
stockholders. Dividends are declared at the Board’s discretion.
The
following table shows information about common dividends paid on the dates
indicated.
Payment
date
|
|
Record
date
|
|
Dividend
per share
|
|
January
17, 2006
|
|
|
January
6, 2006
|
|
$
|
0.15
|
|
April
6, 2006
|
|
|
March
24, 2006
|
|
$
|
1.19
|
1
|
July
17, 2006
|
|
|
July
7, 2006
|
|
$
|
0.19
|
|
October
16, 2006
|
|
|
October
6, 2006
|
|
$
|
0.19
|
|
January
18, 2007
|
|
|
January
8, 2007
|
|
$
|
0.19
|
|
April
10, 2007
|
|
|
March
30, 2007
|
|
$
|
0.22
|
|
______________________
1
Includes
$1.00 special dividend.
On
February 2006, the Board declared a 25% increase in the quarterly dividend,
from
$0.15 per share to $0.1875 per share. In addition, the Board declared a special
cash dividend of $1.00 per common share, which was paid on April 6, 2006 to
stockholders of record as of March 24, 2006.
On
February 2007, the Board declared an increase in the quarterly dividend from
$0.1875 per share to $0.22 per share.
The
following table shows information about preferred dividends paid on the dates
indicated.
Payment
date
|
|
Record
date
|
|
Dividend
per share
|
|
May
17, 2004
|
|
|
April
30, 2004
|
|
$
|
0.40
|
|
November
15, 2004
|
|
|
November
8, 2004
|
|
$
|
1.90
|
|
May
16, 2005
|
|
|
April
29, 2005
|
|
$
|
2.15
|
|
November
15, 2005
|
|
|
October
31, 2005
|
|
$
|
2.18
|
|
May
15, 2006
|
|
|
April
28, 2006
|
|
$
|
2.22
|
|
B.
Significant
Changes
Not
applicable
Item
9.
The
Offer and Listing
A.
Offer
and Listing Details
The
Bank’s
Class E
shares are listed on the New York Stock Exchange under the symbol BLX. The
following table shows the high and low sales prices of the Class E shares on
the
New York Stock Exchange for the periods indicated.
|
|
Price
per Class E Share (in $)
|
|
|
|
High
|
|
Low
|
|
2002
|
|
|
29.70
|
|
|
2.00
|
|
2003
|
|
|
19.95
|
|
|
4.01
|
|
2004
|
|
|
20.00
|
|
|
14.00
|
|
2005
|
|
|
25.50
|
|
|
15.34
|
|
2006
|
|
|
18.70
|
|
|
14.59
|
|
2005:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
25.50
|
|
|
18.53
|
|
Second
Quarter
|
|
|
20.95
|
|
|
15.34
|
|
Third
Quarter
|
|
|
18.52
|
|
|
16.70
|
|
Fourth
Quarter
|
|
|
18.95
|
|
|
16.40
|
|
2006:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
18.70
|
|
|
15.65
|
|
Second
Quarter
|
|
|
17.44
|
|
|
14.59
|
|
Third
Quarter
|
|
|
16.90
|
|
|
15.38
|
|
Fourth
Quarter
|
|
|
17.05
|
|
|
15.10
|
|
2007:
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
17.12
|
|
|
15.52
|
|
2006:
|
|
|
|
|
|
|
|
November
|
|
|
16.81
|
|
|
15.58
|
|
December
|
|
|
17.05
|
|
|
15.91
|
|
2007:
|
|
|
|
|
|
|
|
January
|
|
|
17.12
|
|
|
16.12
|
|
February
|
|
|
17.07
|
|
|
16.25
|
|
March
|
|
|
16.80
|
|
|
15.52
|
|
April
|
|
|
20.02
|
|
|
16.50
|
|
May
|
|
|
21.60
|
|
|
18.60
|
|
B.
Plan
of Distribution
Not
required in this Annual Report.
C.
Markets
The
Bank’s Class A shares and Class B shares were sold in private placements or sold
in connection with the Bank’s 2003 rights offering, are not listed on any
exchange and are not publicly traded. The Bank’s Class E shares, which
constitute the only class of shares publicly traded (on the New York Stock
Exchange), represent approximately 75% of the total shares of the Bank’s common
stock issued and outstanding at December 31, 2006. The Bank’s Class B shares are
convertible into Class E shares on a one to one basis.
D.
Selling
Shareholders
Not
required in this Annual Report.
E.
Dilution
Not
required in this Annual Report.
F.
Expenses
of the Issue
Not
required in this Annual Report.
Item
10.
Additional
Information
A.
Share
Capital
Not
required in this Annual Report.
B.
Memorandum
and Articles of Association
The
Amended and Restated Articles of Incorporation, filed as an exhibit to the
Form
20-F for the fiscal year ended December 31, 2002 filed with the Commission
on
February 24, 2003, is referred to and incorporated by reference into this Item
10.B.
C.
Material
Contracts
The
Bank
has not entered into any material contract outside the ordinary course of
business during the two-year period immediately preceding the date of this
Annual Report. See Note 17 to the Consolidated Financial
Statements.
D.
Exchange
Controls
Currently,
there are no Panamanian restrictions on the export or import of capital,
including foreign exchange controls, and no restrictions on the payment of
dividends or interest, nor are there limitations on the rights of foreign
stockholders to hold or vote stock.
E.
Taxation
The
following is a summary of certain U.S. federal and Panamanian tax matters that
may be relevant with respect to the acquisition, ownership and disposition
of
Class E shares. Prospective purchasers of Class E shares should consult their
own tax advisors as to the United States, Panamanian or other tax consequences
of the acquisition, ownership and disposition of Class E shares.
This
summary does not address the consequences of the acquisition, ownership or
disposition of the Bank’s Class A or Class B shares.
United
States Taxes
This
summary describes the principal U.S. federal income tax consequences of the
ownership and disposition of the Class E shares, but does not purport to be
a
comprehensive description of all of the tax considerations that may be relevant
to holders of Class E shares. This summary applies only to current holders
that
hold Class E shares as capital assets and does not address classes of holders
that are subject to special treatment under the United States Internal Revenue
Code of 1986, as amended (the “Code”), such as dealers in securities or
currencies, financial institutions, tax-exempt entities, regulated investment
companies, insurance companies, securities traders that elect mark-to-market
tax
accounting, persons subject to the alternative minimum tax, certain U.S.
expatriates, persons holding Class E shares as part of a hedging, constructive
ownership or conversion transaction or a straddle, holders whose functional
currency is not the U.S. dollar, or a holder that owns 10% or more (directly,
indirectly or constructively) of the voting shares of the Bank.
This
summary is based upon the Code, existing, temporary and proposed regulations
promulgated there under, judicial decisions and administrative pronouncements,
as all in effect on the date of this Annual Report and which are subject to
change (possibly on a retroactive basis) and to differing interpretations.
Purchasers or holders of Class E shares should consult their own tax advisors
as
to the U.S. federal, state and local, and foreign tax consequences of the
ownership and disposition of Class E shares in their particular
circumstances.
As
used
herein, a “U.S. Holder” refers to a beneficial holder of Class E shares that is,
for U.S. federal income tax purposes, (1) an individual citizen or resident
of
the United States, (2) a corporation, or an entity treated as a corporation,
organized or created in or under the laws of the U.S. or any political
subdivision thereof, (3) an estate the income of which is subject to U.S.
federal income taxation without regard to the source of its income, (4) a trust,
if both (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) one or more U.S.
persons (as defined in the Code) have the authority to control all substantial
decisions of the trust, or a trust that has made a valid election under U.S.
Treasury Regulations to be treated as a domestic trust, and (5) any holder
otherwise subject to U.S. federal income taxation on a net income basis with
respect to Class E shares (including a non-resident alien individual or foreign
corporation that holds, or is deemed to hold, any Class E share in connection
with the conduct of a U.S. trade or business). If a partnership (including
for
this purpose any entity treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of Class E shares, the U.S. federal income
tax
consequences to a partner in the partnership will generally depend on the status
of the partner and the activities of the partnership. A holder of Class E shares
that is a partnership and the partners in such partnership should consult their
own tax advisors regarding the U.S. federal income tax consequences of the
ownership and disposition of Class E shares.
Taxation
of Distributions
Subject
to the “Passive Foreign Investment Company Status” discussion below, to the
extent paid out of current or accumulated earnings and profits of the Bank
as
determined under U.S. federal income tax principles (“earnings and profits”),
distributions made with respect to Class E shares (other than certain pro rata
distributions of capital stock of the Bank or rights to subscribe for shares
of
capital stock of the Bank) will be includable in income of a U.S. Holder as
ordinary dividend income in accordance with the U.S. Holder’s regular method of
accounting for U.S. federal income tax purposes whether paid in cash or Class
E
shares. To the extent that a distribution exceeds the Bank’s earnings and
profits, such distribution will be treated, first, as a nontaxable return of
capital to the extent of the U.S. Holder’s tax basis in the Class E shares and
will reduce the U.S. Holder’s tax basis in such shares, and thereafter as a
capital gain from the sale or disposition of Class E shares. See “United States
Taxes—Taxation of Capital Gains”. The amount of the distribution will equal the
gross amount of the distribution received by the U.S. Holder, including any
Panamanian taxes withheld from such distribution.
Distributions
made with respect to Class E shares out of earnings and profits generally will
be treated as dividend income from sources outside the United States. U.S.
Holders that are corporations will not be entitled to the “dividends received
deduction” under Section 243 of the Code with respect to such dividends.
Dividends may be eligible for the special 15% rate applicable to “qualified
dividend income” received by an individual, provided, that (1) the Bank is not a
“passive foreign investment company” in the year in which the dividend is paid
nor in the immediately preceding year, (2) the class of stock with respect
to
which the dividend is paid is readily tradable on an established securities
market in the U.S., and (3) the U.S. Holder held his shares for more than 60
days during the 121-day period beginning 60 days prior to the ex-dividend date
and meets other holding period requirements. Subject to certain conditions
and
limitations, Panamanian tax withheld from dividends will be treated as a foreign
income tax eligible for deduction from taxable income or as a credit against
a
U.S. Holder’s U.S. federal income tax liability. Distributions of dividend
income made with respect to Class E shares generally will be treated as
“passive” income or, in the case of certain U.S. Holders, “general category
income,” for purposes of computing a U.S. Holder’s U.S. foreign tax
credit.
Less
than
25 percent of the Bank’s gross income is effectively connected with the conduct
of a trade or business in the United States, and the Bank expects this to remain
true. If this remains the case, a holder of Class E shares that is not a U.S.
Holder (a “non-U.S. Holder”) generally will not be subject to U.S. federal
income tax or withholding tax on distributions received on Class E shares that
are treated as dividend income for U.S. federal income tax purposes. Special
rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S.
trade or business, (2) that are former citizens or long-term residents of the
United States, “controlled foreign corporations,” corporations that accumulate
earnings to avoid U.S. federal income tax, and certain foreign charitable
organizations, each within the meaning of the Code, or (3) certain non-resident
alien individuals who are present in the United States for 183 days or more
during a taxable year. Such persons should consult their own tax advisors as
to
the U.S. federal income or other tax consequences of the ownership and
disposition of Class E shares.
Taxation
of Capital Gains
Subject
to the “Passive foreign Investment Company Status” discussion below, gain or
loss realized by a U.S. Holder on the sale or other disposition of Class E
shares will generally be subject to U.S. federal income tax as capital gain
or
loss in an amount equal to the difference between the U.S. Holder’s tax basis in
the Class E shares and the amount realized on the disposition. Such gain will
be
treated as long-term capital gain if the Class E shares are held by the U.S.
Holder for more than one year at the time of the sale or other disposition.
Otherwise, the gain will be treated as a short-term capital gain. Gain realized
by a U.S. Holder on the sale or other disposition of Class E shares generally
will be treated as U.S. source income for U.S. foreign tax credit purposes,
unless the gain is attributable to an office or fixed place of business
maintained by the U.S. Holder outside the United States or is recognized by
an
individual whose tax home is outside the United States, and certain other
conditions are met. For U.S. federal income tax purposes, capital losses are
subject to limitations on deductibility. As a general rule, U.S. Holders that
are corporations can use capital losses for a taxable year only to offset
capital gains in that year. A corporation may be entitled to carry back unused
capital losses to the three preceding tax years and to carry over losses to
the
five following tax years. In the case of non-corporate U.S. Holders, capital
losses in a taxable year are deductible to the extent of any capital gains
plus
ordinary income of up to $3,000. Unused capital losses of non-corporate U.S.
Holders may be carried over indefinitely.
A
non-U.S. Holder of Class E shares will generally not be subject to U.S. federal
income tax or withholding tax on gain realized on the sale or other disposition
of Class E shares. However, special rules may apply in the case of non-U.S.
Holders (1) that are engaged in a U.S. trade or business, (2) that are former
citizens or long-term residents of the United States, “controlled foreign
corporations,” corporations which accumulate earnings to avoid U.S. federal
income tax, and certain foreign charitable organizations, each within the
meaning of the Code, or (3) certain non-resident alien individuals who are
present in the United States for 183 days or more during a taxable year. Such
persons should consult their own tax advisors as to the United States or other
tax consequences of the purchase, ownership and disposition of the Class E
shares.
Passive
Foreign Investment Company Status
Under
the
Code, certain rules apply to an entity classified as a “passive foreign
investment company” (“PFIC”). A PFIC is defined as any foreign (i.e., non-U.S.)
corporation if either (1) 75% or more of its gross income for the taxable year
is passive income (generally including, among other types of income, dividends,
interest and gains from the sale of stock and securities) or (2) 50% or more
of
its assets (by value) produce, or are held for the production of, passive
income. The Code provides an exception for foreign institutions in the active
conduct of a banking business, provided the institution is licensed to do
business in the United States. Under proposed regulations, the exception is
extended to a foreign corporation that is not licensed to do business as a
bank
in the United States so long as such foreign corporation is an “active foreign
bank.” Based on its current and intended method of operations as described
herein, the Bank believes that it is not a PFIC under current U.S. federal
income tax law because it is eligible for the exception available to active
foreign banks in the Code and the proposed regulations. The Bank intends to
continue to operate in a manner that will entitle the Bank to rely upon that
exception to avoid classification as a PFIC.
If
the
Bank were to become a PFIC for purposes of the Code, unless a U.S. Holder makes
the election described below, a U.S. Holder generally will be subject to a
special tax charge with respect to (a) any gain realized on the sale or other
disposition of Class E shares and (b) any “excess distribution” by the Bank to
the U.S. Holder (generally, any distributions including return of capital
distributions, received by the U.S. Holder on the Class E shares in a taxable
year that are greater than 125 percent of the average annual distributions
received by the U.S. Holder in the three preceding taxable years, or, if
shorter, the U.S. Holder’s holding period). Under these rules (1) the gain or
excess distribution would be allocated ratably over the U.S. Holder’s holding
period for the Class E shares, (2) the amount allocated to the current taxable
year would be treated as ordinary income, (3) the amount allocated to each
prior year would be subject to tax at the highest rate in effect for that year;
and (4) on interest charge at the rate generally applicable to
underpayments of tax would be imposed with respect to the resulting tax
attributable to each such prior year. For purposes of the foregoing rules,
a
U.S. Holder of Class E shares that uses such stock as security for a loan will
be treated as having disposed of such stock.
If
the
Bank were a PFIC, U.S. Holders of interests in a holder of Class E shares may
be
treated as indirect holders of their proportionate share of the Class E shares
and may be taxed on their proportionate share of any excess distributions or
gain attributable to the Class E shares. An indirect holder also must treat
an
appropriate portion of its gain on the sale or disposition of its interest
in
the actual holder as gain on the sale of Class E shares.
If
the
Bank were to become a PFIC, a U.S. Holder could make an election, provided
the
Bank complies with certain reporting requirements, to have the Bank treated,
with respect to such U.S. Holder, as a “qualified electing fund” (hereinafter
referred to as a “QEF election”), in which case, the electing U.S. Holder would
be required to include annually in gross income the U.S. Holder’s proportionate
share of the Bank’s ordinary earnings and net capital gains, whether or not such
amounts are actually distributed. If the Bank were to become a PFIC, the Bank
intends to so notify each U.S. Holder and to comply with all reporting
requirements necessary for a U.S. Holder to make a QEF election and will provide
to record U.S. Holders of Class E shares such information as may be required
to
make such QEF election.
If
the
Bank is a PFIC in any year, a U.S. Holder that beneficially owns Class E shares
during such year must make an annual return on Internal Revenue Service Form
8621, which describes the income received (or deemed to be received if a QEF
election is in effect) from the Bank. The Bank will, if applicable, provide
all
information necessary for a U.S. Holder of record to make an annual return
on
Form 8621.
A
U.S.
Holder that owns certain “marketable stock” in a PFIC may elect to
mark-to-market such stock and, subject to certain exceptions, include in income
any gain (increases in market value) or loss (decreases in market value to
the
extent of prior gains recognized) realized as ordinary income or loss to avoid
the adverse consequences described above. U.S. Holders of Class E shares are
urged to consult their own tax advisors as to the consequences of owning stock
in a PFIC and whether such U.S. Holder would be eligible to make either of
the
aforementioned elections to mitigate the adverse effects of such
consequences.
Information
Reporting and Backup Withholding
Each
U.S.
payor making payments in respect of Class E shares will generally be required
to
provide the Internal Revenue Service (the “IRS”) with certain information,
including the name, address and taxpayer identification number of the beneficial
owner of Class E shares, and the aggregate amount of dividends paid to such
beneficial owner during the calendar year. Under the backup withholding rules,
a
holder may be subject to backup withholding at a current rate of 28% with
respect to proceeds received on the sale or exchange of Class E shares within
the United States by non-corporate U.S. Holders and to dividends paid, unless
such holder (1) is a corporation or comes within certain other exempt categories
(including securities broker-dealers, other financial institutions, tax-exempt
organizations, qualified pension and profit sharing trusts and individual
retirement accounts), and, when required, demonstrates this fact or (2) provides
a taxpayer identification number, certifies as to no loss of exemption and
otherwise complies with the applicable requirements of the backup withholding
rules. Non-U.S. Holders are generally exempt from information reporting and
backup withholding, but may be required to provide a properly completed Form
W-8BEN (or other similar form) or otherwise comply with applicable certification
and identification procedures in order to prove their exemption. This backup
withholding tax is not an additional tax and any amounts withheld from a payment
to a holder of Class E shares will be refunded (or credited against such
holder’s U.S. federal income tax liability, if any) provided that the required
information is furnished to the IRS.
There
is
no income tax treaty between Panama and the United States.
Panamanian
Taxes
The
following is a summary of the principal Panamanian tax consequences arising
in
connection with the ownership and disposition of the Bank’s Class E shares. This
summary is based upon the laws and regulations of Panama, as well as court
precedents and interpretative rulings, in effect as of the date of this Annual
Report, all of which are subject to prospective and retroactive
change.
General
Principle
The
Bank
is exempt from income tax in Panama under a special exemption granted to the
Bank pursuant to Law 38 of July 25, 1978. In addition, under general rules
of
income tax in Panama, only income that is deemed to be Panama source income
is
subject to taxation in Panama. Accordingly, since the Bank’s income is derived
primarily from sources outside of Panama and is not deemed to be Panama source
income, even in the absence of such a special exemption, the Bank would have
limited income tax liability in Panama.
Taxation
of Distributions
Dividends
whether cash or in kind, paid by the Bank in respect of its shares are also
exempt from dividend tax or other withholding under the aforementioned special
legislation. If such special legislation did not exist, Panama would impose
a
10% withholding tax on dividends or distributions paid in respect of the Bank’s
registered shares (20% in respect of the Bank’s bearer shares), to the extent
such dividends are paid from income derived by the Bank from Panamanian
sources.
Taxation
of Capital Gains
Inasmuch
as almost all of the Bank’s income derives from non-Panamanian sources, capital
gains realized by an individual or a corporation, regardless of its nationality
or residency, on the sale or other disposition outside of Panama of Class E
shares should not be subject to taxation in Panama. However, there are no rules
of income allocation currently in effect in Panama with respect to capital
gains
and it cannot be determined with certainty when the tax authorities would
consider that a significant amount of the Bank’s income derives from Panamanian
sources, thus resulting in the taxation of capital gains realized on the sale
or
disposition of the Bank’s Class E shares.
F.
Dividends
and Paying Agents
Not
required in this Annual Report.
G.
Statement
by Experts
Not
required in this Annual Report.
H.
Documents
on Display
Upon
written or oral request, the Bank will provide without charge to each person
to
whom this Annual Report is delivered, a copy of any or all of the documents
listed as exhibits to this Annual Report (other than exhibits to those
documents, unless the exhibits are specifically incorporated by reference in
the
documents). Written requests for copies should be directed to the attention
of
Carlos Yap, Chief Financial Officer, Bladex, as follows: (i) if by regular
mail,
to P.O. Box 0819-08730, Panama City, Republic of Panama, and (ii) if by courier,
to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama. Telephone
requests may be directed to Mr. Yap at 011-507-210-8563. Written requests may
also be faxed to Mr. Yap at 011-507-269-6333 or sent via e-mail to cyap@blx.com.
Information is also available on the Bank’s website at:
www.blx.com.
I.
Subsidiary
Information
Not
applicable
Item
11.
Quantitative
and Qualitative Disclosure About Market Risk
The
Bank’s risk management policies, as approved by the Board from time to time, are
designed to identify and control the Bank’s credit and market risks by
establishing and monitoring appropriate limits on the Bank’s credit and market
exposures. Certain members of the Board constitute the Assets and Liabilities
Committee, which meet on a regular basis and monitor and control the risks
in
each specific area. At the management level, the Bank has a Risk Management
Department that measures and controls the credit and market exposure of the
Bank.
The
Bank’s businesses are subject to market risk. The components of market risk are
interest rate risk inherent in the Bank’s balance sheet, price risk in the
Bank’s principal investing portfolio and market value risk in the Bank’s trading
portfolios. For quantitative information relating to the Bank’s interest rate
risk and information relating to the Bank’s management of interest rate risk,
see “Liquidity and Capital Resources”, and Notes 2 (q) and 18 to the
Consolidated Financial Statements.
For
information regarding derivative financial instruments see Notes 2 (q) and
18 to
the Consolidated Financial Statements. For information regarding investment
securities see “Business Overview—Investment Securities” and Note 5 to the
Consolidated Financial Statements.
Information
about Derivative Financial Instruments
The
table
below lists for each of the years 2006 to 2011 the notional amounts and weighted
interest rates, as of December 31, 2006, for the Bank’s investments, loans,
borrowings and placements, interest rate swaps, cross currency swaps, forward
currency exchange agreements, and trading assets and liabilities.
|
|
Maturities
|
|
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
Thereafter
|
|
Total
2006
|
|
Fair
Value
2006
|
|
|
|
($
Equivalent in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
- Trading
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
141,000
|
|
|
15,000
|
|
|
34,000
|
|
|
35,000
|
|
|
5,000
|
|
|
190,338
|
|
|
420,338
|
|
|
464,298
|
|
Average
fixed rate
|
|
|
6.60
|
%
|
|
4.38
|
%
|
|
8.06
|
%
|
|
7.55
|
%
|
|
9.63
|
%
|
|
9.99
|
%
|
|
8.29
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
5,000
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
7,000
|
|
|
7,015
|
|
Average
variable rate
|
|
|
|
|
|
5.82
|
%
|
|
|
|
|
7.17
|
%
|
|
|
|
|
|
|
|
6.21
|
%
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
1,426,912
|
|
|
602
|
|
|
442
|
|
|
302
|
|
|
139
|
|
|
4,000
|
|
|
1,432,397
|
|
|
1,402,631
|
|
Average
fixed rate
|
|
|
6.09
|
%
|
|
6.10
|
%
|
|
5.76
|
%
|
|
5.43
|
%
|
|
5.21
|
%
|
|
7.37
|
%
|
|
6.09
|
%
|
|
|
|
Mexican
Peso
|
|
|
14,039
|
|
|
14,893
|
|
|
16,678
|
|
|
18,678
|
|
|
1,654
|
|
|
|
|
|
65,942
|
|
|
69,940
|
|
Average
fixed rate
|
|
|
11.28
|
%
|
|
11.38
|
%
|
|
11.38
|
%
|
|
11.38
|
%
|
|
11.38
|
%
|
|
|
|
|
11.36
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
670,137
|
|
|
364,238
|
|
|
199,192
|
|
|
100,045
|
|
|
106,904
|
|
|
25,935
|
|
|
1,466,451
|
|
|
1,452,599
|
|
Average
variable rate
|
|
|
6.49
|
%
|
|
6.33
|
%
|
|
6.98
|
%
|
|
6.86
|
%
|
|
6.45
|
%
|
|
6.88
|
%
|
|
6.54
|
%
|
|
|
|
Mexican
Peso
|
|
|
12,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,223
|
|
|
12,176
|
|
Average
variable rate
|
|
|
9.58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.58
|
%
|
|
|
|
Euro
|
|
|
482
|
|
|
892
|
|
|
819
|
|
|
1,157
|
|
|
409
|
|
|
|
|
|
3,759
|
|
|
3,595
|
|
Average
variable rate
|
|
|
4.53
|
%
|
|
4.55
|
%
|
|
4.57
|
%
|
|
4.59
|
%
|
|
4.57
|
%
|
|
|
|
|
4.56
|
%
|
|
|
|
Borrowings
and Placements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
1,635,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,635,604
|
|
|
1,635,317
|
|
Average
fixed rate
|
|
|
5.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.48
|
%
|
|
|
|
Mexican
Peso
|
|
|
15,962
|
|
|
15,962
|
|
|
15,962
|
|
|
15,962
|
|
|
1,330
|
|
|
|
|
|
65,178
|
|
|
68,455
|
|
Average
fixed rate
|
|
|
8.42
|
%
|
|
8.42
|
%
|
|
8.42
|
%
|
|
8.42
|
%
|
|
8.42
|
%
|
|
|
|
|
8.42
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
105,180
|
|
|
291,500
|
|
|
52,000
|
|
|
5,000
|
|
|
|
|
|
|
|
|
453,680
|
|
|
455,015
|
|
Average
variable rate
|
|
|
5.74
|
%
|
|
5.76
|
%
|
|
5.80
|
%
|
|
5.98
|
%
|
|
|
|
|
|
|
|
5.76
|
%
|
|
|
|
Interest
Rate Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars variable to fixed
|
|
|
|
|
|
|
|
|
19,000
|
|
|
35,000
|
|
|
5,000
|
|
|
190,338
|
|
|
249,338
|
|
|
(1,655
|
)
|
Average
pay rate
|
|
|
|
|
|
|
|
|
8.61
|
%
|
|
7.55
|
%
|
|
9.63
|
%
|
|
9.99
|
%
|
|
9.54
|
%
|
|
|
|
Average
receive rate
|
|
|
|
|
|
|
|
|
8.88
|
%
|
|
7.81
|
%
|
|
9.92
|
%
|
|
10.11
|
%
|
|
9.69
|
%
|
|
|
|
Cross
Currency Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars
|
|
|
462
|
|
|
853
|
|
|
785
|
|
|
1,108
|
|
|
392
|
|
|
|
|
|
3,601
|
|
|
|
|
US
Dollars variable rate
|
|
|
6.63
|
%
|
|
6.64
|
%
|
|
6.65
|
%
|
|
6.66
|
%
|
|
6.65
|
%
|
|
|
|
|
6.65
|
%
|
|
|
|
Pay
EUR
|
|
|
462
|
|
|
854
|
|
|
785
|
|
|
1,108
|
|
|
392
|
|
|
|
|
|
3,601
|
|
|
(164
|
)
|
EUR
variable rate
|
|
|
4.53
|
%
|
|
4.55
|
%
|
|
4.57
|
%
|
|
4.59
|
%
|
|
4.57
|
%
|
|
|
|
|
4.56
|
%
|
|
|
|
Forward
Currency Exchange Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars/Pay Mexican Pesos
|
|
|
14,391
|
|
|
466
|
|
|
1,686
|
|
|
2,924
|
|
|
299
|
|
|
|
|
|
19,766
|
|
|
(340
|
)
|
Average
exchange rate
|
|
|
11.03
|
|
|
11.90
|
|
|
11.90
|
|
|
11.90
|
|
|
11.90
|
|
|
|
|
|
11.27
|
|
|
|
|
Pay
US Dollars/Receive Mexican Pesos
|
|
|
1,593
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,598
|
|
|
66
|
|
|
|
Maturities
|
|
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
Thereafter
|
|
Total
2006
|
|
Fair
Value
2006
|
|
|
|
($
Equivalent in thousands)
|
|
Average
exchange rate
|
|
|
11.31
|
|
|
11.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.31
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
60,750
|
|
|
65,750
|
|
|
69.589
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
7.50
|
%
|
|
|
|
|
|
|
|
8.56
|
%
|
|
8.48
|
%
|
|
|
|
Mexican
Peso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,520
|
|
|
18,520
|
|
|
21,184
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.18
|
%
|
|
9.18
|
%
|
|
|
|
Uruguayan
Peso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,829
|
|
|
5,829
|
|
|
6,433
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00
|
%
|
|
5.00
|
%
|
|
|
|
Brasilian
Real
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,139
|
|
|
11,139
|
|
|
12,671
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.50
|
%
|
|
12.50
|
%
|
|
|
|
Variable
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,103
|
|
|
15,103
|
|
|
6,080
|
|
Average
variable rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
%
|
|
0.00
|
%
|
|
|
|
Argentine
Peso
|
|
|
|
|
|
13,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,262
|
|
|
13,774
|
|
Average
variable rate
|
|
|
|
|
|
11.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.99
|
%
|
|
|
|
Credit
default swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
5,000
|
|
|
79
|
|
Average
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.40
|
%
|
|
|
|
|
1.40
|
%
|
|
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasilian
Real
|
|
|
|
|
|
2,038
|
|
|
|
|
|
|
|
|
|
|
|
4,685
|
|
|
6,723
|
|
|
104
|
|
Average
rate
|
|
|
|
|
|
13.63
|
%
|
|
|
|
|
|
|
|
|
|
|
12.63
|
%
|
|
12.93
|
%
|
|
|
|
Mexican
Peso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,315
|
|
|
2,315
|
|
|
161
|
|
Average
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.84
|
%
|
|
8.84
|
%
|
|
|
|
Trading
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
sold short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,000
|
|
|
52,000
|
|
|
54,039
|
|
Average
fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.00
|
%
|
|
6.00
|
%
|
|
|
|
Forward
currency exchange agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive
US Dollars/Pay Argentine Pesos
|
|
|
5,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,243
|
|
|
(147
|
)
|
Average
exchange rate
|
|
|
3.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.21
|
|
|
|
|
Receive
US Dollars/Pay Brasilian Reales
|
|
|
36,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,398
|
|
|
(522
|
)
|
Average
exchange rate
|
|
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.22
|
|
|
|
|
Pay
US Dollars/Receive Brasilian Reales
|
|
|
(36,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,398
|
)
|
|
|
|
Average
exchange rate
|
|
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.19
|
|
|
|
|
Pay
US Dollars/Receive Mexican Pesos
|
|
|
15,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,269
|
|
|
(212
|
)
|
Average
exchange rate
|
|
|
10.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.99
|
|
|
|
|
Receive
US Dollars/Pay Mexican Pesos
|
|
|
(15,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,269
|
)
|
|
|
|
Average
exchange rate
|
|
|
11.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.15
|
|
|
|
|
Pay
US Dollars/Receive Colombian Pesos
|
|
|
20,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,784
|
|
|
8
|
|
Average
exchange rate
|
|
|
2,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,327
|
|
|
|
|
Receive
US Dollars/Pay Colombian Pesos
|
|
|
(15,770
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,770
|
)
|
|
|
|
Average
exchange rate
|
|
|
2,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,349
|
|
|
|
|
Pay
US Dollars/Receive Peruvian Nuevos Soles
|
|
|
10,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,064
|
|
|
79
|
|
Average
exchange rate
|
|
|
3.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.22
|
|
|
|
|
For
information regarding fair value disclosure of financial instruments, see Note
20 to the Consolidated Financial Statements.
Foreign
Exchange Risk Management and Sensitivity
The
Bank
accepts deposits and raises funds principally in United States dollars, and
makes loans mostly in United States dollars. Currency exchange risk arises
when
the Bank accepts deposits or raises funds in one currency and lends or invests
the proceeds in another. Whenever possible, foreign currency-denominated assets
are funded with liability instruments denominated in the same currency. In
those
cases where assets were funded in different currencies, forward foreign exchange
or cross currency swaps contracts were used to fully hedge the risk resulting
from this cross currency funding. During 2006, the Bank did not held significant
open foreign exchange positions, except for trading purposes. The Fund invests
in securities denominated in foreign currency as well as in forward foreign
currency exchange contracts, for trading purposes. At December 31, 2006, the
Bank had an equivalent of $65 million of non-dollar financial liabilities,
which
matched funded asset transactions in the same currency.
Item
12.
Description
of Securities Other than Equity Securities
Not
required in this Annual Report.