As previously discussed, the current banking regulation allows the operation of different types of entities within the financial system such as: Multiple Banks, Credit Entities, Savings and Loan Associations, and Savings and Credit Institutions. The law opens up the financial industry by granting equal treatment to foreign financial intermediaries with local institutions, establishing the parameters for their ability to operate in the Dominican Republic. Likewise, it authorizes foreign banks that are not domiciled in the country to establish representative offices in Dominican territory, in accordance with existing statutes.

The establishment of financial intermediaries is subject to the approval of the Monetary Board, subject to the favorable opinion of the Banking Superintendent.

With respect to banking regulations, the law has taken into account modern international trends. To promote the stability and security of the system, our legislation follows the principles of Basel I and II and has a strict compliance and close supervision system operated by the financial and monetary authorities.

The law reaffirms the obligation to deposit, at the Central Bank, liquidity reserves under the system called “legal reserve” (encaje legal).  It establishes mandatory norms with the objective of facilitating the supervision of financial entities; creates strict requirements for adequate corporate governance; and establishes a preventive supervision model based on a process of follow-up on the minimum conditions of liquidity and solvency to avoid regulatory insolvency.

The law’s preventive approach is especially manifested in the regulation system created to confront financial difficulties that may affect these entities. The Extraordinary Program of Risk Prevention for Financial Intermediary Institutions is a fund that can channel public and private resources to protect deposits and avoid a systemic risk that may affect the financial system as a whole.

In addition, Dominican law creates a system of administrative sanctions that are applicable in cases of violations of the law.  It contains rules for weighting violations and imposing sanctions, explains the types of violations and applicable penalties, and sets forth the special provisions for the sanctioning process.  An institution, its directors, and related companies may be held liable and subject to administrative sanctions under the law. Also, the law defines criminal infractions and provides their corresponding sanctions.

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