A JUDGE’S decision to allow a developer to declare bankruptcy retroactively has shaken Panama’s financial community and has been condemned by the Minister of Finance and the head of the Stock Exchange.

Panama Stock Exchange President Roberto Brenes  said the decision to allow R.G. Hotels to declare bankruptcy retroactive to 2012 "threatens the security of the financial system,"

Brenes said the decision creates an environment of insecurity among those who purchased $30 million in bonds issued by the developer after that date reports La Prensa

The decision was handed down last week by Coclé Judge Jesus Corrales Hidalgo, and was based on information submitted by the owners of R.G. Hotels, who asked for a voluntary bankruptcy due to the financial problems of the hotel group.

Minister of Economy and Finance Dulcidio De La Guardia also criticized the ruling, saying it leaves bondholders unfairly exposed.

Brenes said that the judge made an incorrect ruling because the company continued to make payments on its debt until October 2014. That showed it was financially viable. After October 2014, it stopped making payments, and stopped providing financial statements in May 2015.

"It was from that moment that the judge should have declared bankruptcy," Brenes said.

The company changed hands in 2014, and Brenes said the new owners should have done a better job assessing the financial viability of the company.

Brenes asked: "How did they not notice these alleged problems if they analyzed the company for 90 days before buying it?"

Brenes said that the decision by Corrales puts the entire Panamanian financial system at risk, as it could become a precedent.