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  Banking & Fixed Income Investments In The Dominican Republic:
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The question that you may have is: Why do some people have an interest in holding assets abroad, or in another country?  For one thing, there certainly might be the chance to earn a higher rate of interest, or perhaps some investment opportunities not available in their own home country.  Certainly it is the case that the economy might be growing much faster in another country, and the need to capital that much greater (thus often enough higher interest rates to attract such capital). However, aside from this, it could be the case that some people simply want to secure their money away - putting their assets and funds out of harms way if possible.  In regards to the term of harms way, this could include frivolous lawsuits in their home country, or even something worse, such as a change in government even (that might put themselves and their family assets at risk).   Whatever your own reasons might be, the Dominican Republic is worth consideration for some of your investment funds, or in tandem with a financial strategy for your own retirement (if you might be considering retirement in the Dominican Republic).

. DOMINICAN REPUBLIC BANKING . Before we delve into a discussion about banking options and accounts in the Dominican Republic, we think it to be first and foremost a good idea to start off debunking some myths about banking in other countries in general, and the Dominican Republic specifically.  After all, one of the most common questions we often hear is:  Is it safe? . One of the most common comments or issues discussed is of course one that surrounds the concept of government regulation and banking insurance.   Speaking on the first item, it should be noted that the Dominican Government does indeed have both a banking regulatory body and a securities regulatory body as well.  In fact, it is not so easy to apply for, and be granted a banking license in the Dominican Republic, as those applying must be subject to a rigorous background check and substantial minimum operating capital requirements that must be proven.  And even with that said, it can take perhaps 6 months or longer for Government Authorities in the Dominican Republic to grant a license.  This practice does stand in direct contrast to some other English speaking Caribbean jurisdictions that in the past, just about gave banking licenses away to anyone with a the minimum fee (which often was as small of a sum as US$50,000). . The more in depth and interesting topic though, is the subject of banking reserves and depositor insurance.  Which is to clarify quite plainly that the Dominican Republic does indeed have a Depositors Banking Insurance program in place, and one that is solvent.  Why do we highlight the term solvent?  Well, if you bother to take a deep look at such other programs from other countries, such as the United States based FDIC, you will discover that in reality, the FDIC is in serious financial difficulty (which is a polite way of saying, they are extremely under-capitalized).  If the FDIC was a private insurance company, it would have been liquidated by government insurance regulators long ago for lack of solvency, but alas, the rules are always different for the government – are they not? . In any event, for those of you that like to know about arcane details, banks in the Dominican Republic are required to pay in and maintain a reserve requirement with the Dominican Central Bank that is calculated by both sides of the balance sheet – both assets and liabilities.   And as periodic audits of the banks are completed by the Dominican Government Regulators, that reserve requirement of course can go up or down, all depending upon changes in the bank's balance sheet.  In a simplified form of explanation, local banks in the Dominican Republic are required to reserve against both customer deposits and loans – and those reserve deposits can go as high as 7 percent for certain kinds of unsecured loans on the books.  Again, to contrast this to what goes on in the US, investigate for yourself what banks are required to reserve for (you probably will be shocked to find out the answer). . In terms of actual banking options and banking services for depositors, most major Dominican Banks will offer the very same kinds of products and services found elsewhere:  Savings Accounts, Bank Certificates of Deposit, Internet or On-line Banking options, Debit Cards and Credit Cards, etc.  The only difference you may find, in comparison with most US banks, is the ability to have a US Dollar Account, a Euro Account and Dominican Peso Account, all at the same bank in the same place.  In fact, should you choose Internet or On-Line banking services, you can view all of your savings accounts in the difference currencies together as well. . Since there are NO currency controls in the Dominican Republic, depositors can certainly exchange or switch back and forth among the above currencies mentioned, as often as they like, whenever they like.  In addition, they can access their account balances by withdrawing cash in any of the above currencies as well, by requesting a bank check in one of the above currencies, or via bank to bank wire transfer as well.  The only caveat is that some smaller bank branches may not always have US Dollar or Euro cash balances on hand, so it all depends upon how much you want to withdraw in cash on any given day and at which branch.  However, most bank branches will usually have at least US$3,000 or so on hand in cash at any given day, sometimes more, all depending upon how busy that particular branch is and if they have a large enough number of transactions in foreign currency throughout the day.  But of course, the main branches can usually accommodate depositors that may wish to withdraw larger amounts of cash (in the foreign currency).  Since the Dominican Peso is the national currency, usually there is no difficulty withdrawing funds of any amount in cash, and regardless, bank checks can be drawn for any amount in any of the above referenced currencies regardless. . In terms of minimum deposit requirements, most local banks in the Dominican Republic will allow you to open a US Dollar Savings Account with US$500, a Euro Savings Account with 500 Euros and a Dominican Peso Savings Account with RD$5,000 Pesos.  Some banks of course may even ask for less, but the above is a very reliable general guideline for you.  And with regards to Certificates of Deposit (CDs) in either USD, Euros or Dominican Pesos – you can expect anywhere from US$1,000 to US$5,000 or the equivalent in the other currencies mentioned as the minimum.  However, do keep in mind that CD rates are tiered with most Dominican Banks.  This means that the larger the deposit, the higher the rate of interest.  And as such, and as an example, a CD for US$100,000 with pay a higher interest rate than one for US$10,000 – and similarly a Dominican Peso CD for RD$1 Million Pesos (about the equivalent of US$27,000 under current exchange rates as of September 2011) will pay a higher rate of interest than one for say RD$100,000 Pesos. . To answer some of your additional questions regarding bank Certificates of Deposit or Commercial Paper in the Dominican Republic - - - - While many clients do feel more comfortable with Bank Certificate or Time Deposits, it certainly is true that Commercial Paper will offer the opportunity for higher yields, which also holds true for most other fixed income markets (such as in the US or Europe). Commercial Paper is of course a form of bond, or short-term loan to a private company, usually for some period less than 360 days.  While 90 days is the most common, longer terms are available.  Which has more risk - bank CD's or Commercial Paper?  In reality, many banks offering certificates of deposits could in fact be investing in Commercial Paper, and making a spread between the rate they earn and the rate they offer the bank client.  One aspect to this is that the bank of course takes the responsibility, regardless of how they invest the funds.  For this reason, many clients do feel more comfortable with bank time deposits accordingly.  Obviously, more conservative investors clients looking at commercial paper would usually prefer to invest in older more established (perhaps what can be called blue chip) companies when investigating the idea of such investments. . As of September 2011, current interest rates for commercial paper in US Dollars have been yielding about 6 to 7 percent (locally tax-free in the Dominican Republic) and in Dominican Pesos, anywhere from about 9 up to 12 percent (also locally tax-free as well).   Concerning the higher yields available with Peso denominated investments (either bank CD's or commercial paper),  the most recent inflation statistics would indicate that inflation has been averaging at about 5 percent, so interest earned on investments is above and beyond the inflation rate. . For more information about banking or investing in the Dominican Republic and or for advice and assistance with a banking relationhip, please complete the reply form indicated below. .