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Dominican Republic Stabilizes Financial Sector with World Bank’s Support

SANTO DOMINGO, Dominican Republic - The global economic downturn in 2001 and the banking crisis that followed severely weakened the Dominican Republic’s financial sector. However, through a series of strategic reforms and initiatives supported by the World Bank, the country has made significant strides in stabilizing its financial system.

A Turning Point for the Financial Sector

According to a new report from the World Bank, the Financial Sector Technical Assistance Loan helped address fundamental weaknesses in the financial system and encouraged medium- to long-term institutional and policy reforms. The project, implemented between 2005 and 2011, focused on strengthening regulatory institutions, improving market efficiency, and reducing risk.

Key Achievements

  • Decline in Past Due Loans: A significant decline in past due loans, from 7.5% in 2005 to 1.7% in 2011
  • Increase in Banking System Capitalization: An increase in banking system capitalization, from 8.8% to 9.7%
  • Strong Growth in the Pension System: Strong growth in the pension system, with an average annual investment portfolio expansion of 41.6% between 2005 and 2011
  • Improved Market Efficiency: Improved market efficiency and reduced risk through the implementation of a new Real Time Gross Settlement System

Real-Time Benefits

The World Bank’s support also enabled the creation of a joint Central Bank-Banking Superintendency web-based portal, which has improved the timeliness and quality of information available to these institutions. Additionally, the project contributed to the introduction of a modern platform that allows the Ministry of Finance to manage public debt in a more efficient manner.

Collaboration and Partnerships

The World Bank worked closely with government agencies, including the Central Bank, the Ministry of Finance’s Public Debt Office, and the Superintendency of Banks. The International Monetary Fund (IMF) and the Inter-American Development Bank (IADB) also provided support through coordinated efforts to engage authorities in crisis management.

Future Directions

The World Bank and the government are now discussing options for non-lending technical assistance in areas such as:

  • Crisis Simulation Exercises
  • Financial Services Delivery: Financial services delivery to micro, small, and medium enterprises
  • Consolidation and Supervision of Financial Cooperatives