CENTRAL BANK TAKES LEAD IN REGULATING DOMINICAN REPUBLIC’S FINANCIAL SYSTEM
The Central Bank of the Dominican Republic has been granted significant powers under a new law to regulate the country’s financial system, including the ability to act as agent or correspondent of other central banks and banking institutions abroad.
Granting Credit to Financial Agents
The Monetary Board will determine the circumstances under which the Central Bank may grant credit to financial agents to address temporary liquidity deficiencies not caused by financial stability issues. The amount of credit can be up to 1.5 times the paid-in capital of the institution, and can be formalized through a guaranteed loan with securities, Central Bank deposits, or other means.
Regulations on Financial Agents
The new law defines “financial agents” as institutions that perform financial brokerage, which can be publicly or privately owned. These institutions must obtain prior authorization from the Monetary Board to operate and are subject to operating limits established by the board.
Types of Financial Institutions
- All-purpose banks and credit institutions: considered stock companies
- Savings and loan associations and cooperatives: non-stock entities
Minimum Paid-in Capital Requirements
The law requires a minimum paid-in capital for these institutions, which can never be lower than:
- RD$90 million for all-purpose banks
- RD$18 million for savings and credit banks
- RD$5 million for credit corporations
Foreign Investment
The Monetary Board will determine the requirements and conditions for foreign banks and financial institutions to participate in financial activities within the Dominican Republic. This includes the opening of foreign bank representatives and the participation of individuals and corporations located abroad in financial brokerage activities.
Operations and Services of All-Purpose Banks
All-purpose banks may carry out a range of operations and services, including:
- Receiving deposits
- Issuing securities
- Granting loans
- Discounting drafts
- Acquiring commercial instruments
The Monetary Board will determine the regulations governing these operations and services through future regulations.
Promoting Financial Stability
The Central Bank’s new powers are aimed at promoting financial stability and ensuring the proper functioning of the country’s financial system. The bank’s ability to regulate foreign institutions and banks abroad is expected to attract greater investment and promote economic growth in the Dominican Republic.