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Banking Regulations in the Dominican Republic

Insolvency Proceedings

In the event of insolvency, the Dominican bankruptcy law does not provide for reorganization similar to Chapter 11 of the US Bankruptcy Code. Instead, secured creditors are allowed to continue collection and foreclosure efforts during insolvency proceedings.

• The SIB will take possession of all offices, books, documents, and records in the event of intervention.
• Stockholders’ and creditors’ rights will be suspended.

Capital Adequacy Guidelines

The capital adequacy guidelines for financial institutions in the Dominican Republic have undergone changes as outlined below. No further changes are expected in the near future.

Ownership Restrictions and Implications

In the Dominican Republic, a 30% shareholding interest is considered a “relevant participation” and requires scrutiny from the SIB and Monetary Board.

• Financial institutions may include additional requirements for new investors through their by-laws.
• Regulatory authorities will closely monitor any changes in ownership or control of financial institutions.

Foreign Ownership of Banks

Foreign direct investment in banks in the Dominican Republic is restricted to less than 30% under Article 39 of the MFL. Any foreign bank seeking to establish a branch or subsidiary in the country requires prior approval from the Monetary Board, which must be coordinated with regulators from the country of origin.

Regulatory Implications for Controlling Entities

Entities and individuals controlling banks are subject to specific regulations and requirements, including:

• Approval from the Monetary Board is required to transfer a controlling interest in a bank.
• The transfer of control is subject to the provisions of the Law on Corporations of the Dominican Republic.
• Tax treatment is the same as other individuals not related to financial institutions at a controlling level.

Changes in Control

Changes in control of a bank require approval from the Monetary Board, which involves compliance with provisions set out by law and additional documentation.

• A foreign acquirer may face additional regulatory hurdles and requirements.
• Regulatory authorities are receptive to foreign acquirers, but the process may take longer.

Required Filings for Controlling Entities

Individuals acquiring control of a bank must file the following:

• Official documentation indicating name and legal domicile
• Proof of identity and good conduct
• Certifications of good standing
• Documentation evidencing the origin of capital to be invested in the local entity
• Identity of acquirers