Financial entities with foreign capital in the Dominican Republic.
In the Dominican Republic there are currently (as of 7/02/22) 48 financial intermediation entities, regularized in accordance with the guidelines of the Monetary Board of the Dominican Republic, of which 11 of these have a significant or total foreign shareholding.
Law 16-95 on Foreign Investment, enacted on November 20, 1995, expressly recognizes that foreign investment contributes to the economic growth and development of the Dominican Republic and, therefore, eliminates all barriers that previously existed to the flow of capital in and out of the country. According to figures issued by official agencies, during nine years the Dominican Republic attracted a total of US$22,358.7 million in Foreign Direct Investment (FDI), which indicates the implicit importance of this area of the economy.
Due to the low foreign participation in the origin of the share capital in Dominican banking, many foreigners ask in our offices if there is any limitation to establish and operate a regulated banking entity to perform financial intermediation in the Dominican Republic, since they note that our country is one of the most stable and profitable of the American continent, in terms of foreign investment.
However, as we see in the attached table, many of these entities are composed, if not totally, in a very high percentage of foreign capital:
| Banks | % participation | Origin |
| of assets | of capital | |
| Scotiabank | 5.57 | Canadá |
| Promerica | 1.75 | Nicaragua |
| Banesco | 1.64 | Venezuela |
| Citibank | 0.91 | Estados Unidos |
| Lafise | 0.59 | Nicaragua |
| Adopem | 0.35 | España |
| JMMB | 0.17 | Jamaica |
| Bancamerica | 0.12 | Venezuela |
| Activo | 0.07 | Venezuela |
| Bellbank | 0.05 | Venezuela |
| Atlantico | 0.04 | Venezuela |
In order to answer these questions of our clients, we always refer to the Monetary and Financial Law No. 183-02, which establishes in its article 34 the types of private and shareholding financial intermediation entities that may operate, which are multiple banks, savings and credit banks, and credit corporations.
Article 35 of said Law establishes the manner in which a new financial intermediation entity may operate, for which prior authorization must be obtained from the Monetary Board, which may only be denied for reasons of legality and not for reasons of opportunity.
Article 39 of the Monetary and Financial Law talks about the participation of Foreign Investment in the national financial intermediation activity, which may be carried out under four modalities:
- Through the acquisition of shares of multiple banks, savings and loan banks, and existing credit corporations by banks and other financial institutions, as well as by individuals.
- Through the incorporation of financial intermediation entities of a stock character, in accordance with the provisions of the Monetary and Financial Law No. 183-02.
- Under the subsidiary modality, through the establishment of multiple banks and credit institutions owned by banks and other financial institutions.
- Through the establishment of branches of banks incorporated under the laws of other countries.
It is possible that the low foreign shareholding participation in the Dominican financial system responds to the size, concentration, structure and regulatory factors that affect the efficiency of the Dominican banking market.
Law No. 16-95 on Foreign Investment in the Dominican Republic grants special incentives to foreign persons and national individuals residing abroad who make contributions to a company operating in the Dominican Republic. It regulates the forms and types of foreign investment, its destinations, rights and obligations of the investors, among others.
If you have any questions regarding foreign investment in the Dominican Republic, or specifically in the area of Free Trade Zone or financial intermediation entities, please do not hesitate to contact us.
Virgilio Santana Ripoll
Santana Ripoll & Asociados