Law 183-02 regulates only monetary and financial matters. Article 1(d) specifies that the securities market is governed by its own sector law and regulator (see Capital Markets). The authorities of both sectors coordinate and exchange the information necessary to carry out their functions.

II. The Organization of the Monetary and Financial Administration

The Monetary and Financial Administration comprises the Monetary Board, the Central Bank, and the Superintendence of Banks, with the Monetary Board as its highest organ. The Central Bank and the Superintendence of Banks operate as authorities of equal rank, and their functions are guided by the principles of economy, cooperation, and separation of spheres of competence.

III. The Monetary Board

The Monetary Board is the highest organ of the Monetary and Financial Administration. Its functions include:

• Determining the country’s monetary, exchange, and financial policies.
• Approving the Monetary Program and monitoring its implementation.
• Issuing monetary and financial regulations.
• Approving the internal rules and organizational structures of the Central Bank and the Superintendence of Banks.
• Approving the budgets of the Central Bank and the Superintendence of Banks.
• Granting and revoking authorizations to operate as a financial intermediation entity.
• Authorizing mergers and similar transactions between financial intermediation entities, among other functions established by Law 183-02.

The Monetary Board consists of three ex officio members and six members appointed for a fixed term. The ex officio members hold key functions in the DR financial system: the Governor of the Central Bank, who presides by law; the Minister of Finance; and the Superintendent of Banks. The six remaining members are appointed by the President of the Republic for two-year renewable terms.

IV. The Central Bank

The Central Bank of the Dominican Republic is the sole authorized issuer of banknotes and coins in the country and enjoys autonomy under the Constitution. It implements the monetary, exchange, and financial policies in accordance with the Monetary Program approved by the Monetary Board.

The Central Bank supervises and settles the payment systems (the interbank market). It also compiles and publishes statistics on the balance of payments, the monetary and financial system, and certain aspects of foreign investment, among other data needed to perform its role.

V. The Superintendence of Banks

While the Central Bank watches over monetary matters, the Superintendence of Banks (SB) supervises the legal and prudential aspects of the financial system and its participants.

The SB’s functions include: supervising financial intermediation entities to verify compliance with the law, regulations, guidelines, and circulars; overseeing the establishment of risk provisions; demanding compliance with legal and regulatory provisions; and imposing sanctions. The SB also reviews applications from prospective financial entities for evaluation by the Monetary Board and proposes regulations for the Monetary Board’s consideration.

Both the Central Bank and the SB are accountable to the National Congress and the Executive Branch.

VI. Entities under the Supervision of the Central Bank and Superintendence of Banks

• Multiple-Service Banks (Bancos Múltiples): may receive demand deposits from the public, immediately drawable or by checking account, and perform the full range of banking operations established by law.
• Savings and Loan Banks: may receive savings and term deposits from the public.
• Credit Corporations: may be incorporated to undertake activities similar to savings and loan banks, on a more limited scale.
• Savings and Loan Associations: mutual entities that provide certain financial services.
• Exchange Agents: authorized by the Monetary Board for the sole purpose of foreign currency exchange.

Under Law 183-02, no individual or legal entity may perform financial intermediation in the DR without prior authorization from the Monetary and Financial Administration. For multiple-service banks, savings and loan banks, and credit corporations, the application is first verified by the Superintendence of Banks, which evaluates whether the applicant meets the requirements and submits a letter of no objection to the Monetary Board.

Cross-border lending into the DR by a foreign lender that does not take deposits locally is not, in itself, regulated financial intermediation and requires no local license; interest paid abroad is, however, subject to withholding tax (see Tax Law, section IV), and security packages over local assets must follow Dominican formalities.

This publication is provided for informational purposes only and not as legal advice. Any transaction related to any of the described aspects shall require advice and be specifically consulted with the Firm in advance. © Arthur & Castillo. All Rights Reserved. Next