Dominican Republic Banking
Bank Accounts, Interest Rates, Commercial Paper
clients are always asking us the Dominican Republic banking
system and investments as money matters are certainly a
concern when thinking about investing in or relocating to a
new country. Over the years we have discovered of course
that many people have the same concerns and questions, so to
assist new clients, we are presenting a list of questions and
answers that have been most commonly asked. Hopefully
you will find the answers you might be looking for below, but
individual questions from our clients are always welcome
also. This page has
been updated as of April 25, 2016.
Can Foreigners Open A Bank Account In The Dominican Republic?
YES. Most of the banks in the Dominican Republic will allow foreigners to open an account with their current and valid passport as ID. Many of course will also want banking letters of reference and or other documentation to open an account, but there is NO restriction of any kind for a foreigner to establish a bank account. There are a few banks that may only accept foreigners holding legal residency status (with presentation of of Dominican Cedula ID) as new account applicants, but that is the minority as most of the banks in the country will accept foreigners as account holders with a passport.
How Safe Are Dominican Banks?
In our opinion, much safer than many of the banks in the US and Europe and I will tell you why. There is of course a government run banking depositor insurance fund but unlike the US FDIC bank insurance fund, the Dominican Bank Insurance fund is solvent and ALL banks pay into it. In addition, local banks in the Dominican Republic are required to set aside a reserve deposit with the central bank for BOTH liabilities and assets, which is reviewed and calculated periodically. That percentage or reserve can range up to 6 percent for things like unsecured loans or outstanding credit card debt, so they are much more highly secured than their counterparts in other parts of the world. But that is not the only reason we tend to have more confidence in the Dominican Banking System.
As many of you already are aware, banks in other parts of the world (Europe and the US) have become heavily involved with non traditional banking activities, such as derivatives. In addition, the European banks especially were duped into buying US mortgage backed securities which as we know by now were not exactly AAA rated as was promoted. The point to all this is, Dominican Banks are quite conservative with their activities and have not gotten involved with such things. In addition, banking spreads are quite wide in the Dominican Republic and that is a good thing. So, while Dominican Banks might pay out 4 percent on savings accounts or maybe 7 percent on time deposits (certificates of deposit) they also charge up to about 18 percent for things like car loans and mortgages. In short, the Dominican Republic is not an attractive place to borrow money, but it still is an attractive place to deposit or invest. The bottom line is, banking is profitable, interest rates are the market rate (not contrived zero percent interest as we know is the case elsewhere) and higher borrowing costs deter excessive and untenable debt by the local consumers. Those factors, in our opinion are even more important than the existence of banking insurance in terms of the long term health of the local banking system.
What Kinds Of Bank Accounts Can I Open In The Dominican Republic?
Savings accounts in Dominican Pesos, US Dollars and Euros are available with the larger banks in the country. Likewise, time deposits or certificates of deposit in those three currencies are also available. Checking Accounts are available but for the most part ONLY in Dominican Pesos. The smaller savings and loan institutions (or what is know as building societies in the UK) usually will offer exchange services for US Dollars (to convert into Dominican Pesos) but in terms of accounts, only accounts denominated in Dominican Pesos are offered at these kinds of institutions.
Is There On-Line Banking, Internet Banking And Debit Cards?
Yes, Yes and Yes. Most of the Dominican Banks now offer on-line banking or at least the ability to view accounts on-line. Some of the smaller savings and loan type of institutions may not all have an Internet or on-line system in place for clients, but all of the larger banks certainly do. However, each bank has their own comfort level in terms of what they will allow to happen using the on-line system. Almost all have some form of local bill paying option and ability to transfer between accounts within the bank. Most Dominican Banks are very concerned about fraud and of that reason would tend not to allow outbound wire transfers to be done via the on-line system (they want to make sure it is really you requesting the disbursement), and instead would prefer clients make such requests in person using the banks own specialized request forms for that purpose.
Clients establishing Dominican Peso savings accounts have the option of either asking for a passbook or debit card for the account (most of the banks will offer one or the other as an option). In terms of the debit card, each bank has their own form of card but do keep in mind some smaller financial institutions may only offer a Visa Electron Card whereas the larger banks may offer a full fledged Visa Debit Card that can both be used at ATM machines, at retail stores for in store purchases and on-line as well for purchase via Amazon and other on-line retailers. So, just be aware of the difference between the regular Visa Debit Card and the Electron Card, and what the benefits or limits are with each. There is one large bank that does offer a debit card connected to a US Dollar Savings Account, but the vast majority of banks will only offer the debit card in conjunction with a Dominican Peso Savings Account. However, many clients establish accounts in Pesos, US Dollars and Euros in order to transfer between each account as needed.
Are There Any Currency Controls Or Transfer Restrictions In The Dominican Republic?
NO, there are no restrictions. Clients can remit any amount they wish to their Dominican Bank Account, they can retrieve or wire any amount of funds out they wish and there are no restrictions to exchange between the various currencies and the Dominican Peso.
Many banks of course may ask for additional documentation about inbound wire transfers, especially if it is a large sum, but that is only for due diligence purposes and has nothing to do with any restrictions.
Where Can You Exchange Money In The Dominican Republic?
Most of the larger banks in the country offer the ability to exchange US Dollars or Euros into Dominican Pesos using your passport or cedula for ID. Many of the smaller savings and loan type institutions will only offer exchange services for US Dollars. In addition, there are many private money exchange services, known as a Casa De Cambio or house of exchange that can exchange foreign currency into Dominican Pesos. While the banks are usually limited to only exchanging US Dollars or Euros, many of these casa de cambio establishments will offer exchange for other additional currencies as well although usually more common in the tourist or resort areas (the casa de cambios in Santo Domino and other non tourist areas will usually only do USD and Euro exchanges). A casa de cambio will usually offer a slightly better exchange rate than the banks. As of April 2016, the exchange for US$1 is about 45 Dominican Pesos and for One Euro about 49 Dominican Pesos.
What Are The Current Interest Rates In The Dominican Republic – As Of April 2016?
The bank savings account and time deposit (certificate of deposit) rates for US Dollars and Euros are pretty much in line with what they are in the US and Europe albeit perhaps perhaps one half or one percentage point higher. Dominican Peso Savings Account on average will offer about 4 percent interest and time deposits in Dominican Pesos (certificate of deposit) usually between about 5 and 8 percent all depending upon the amount and time of deposit.
Higher interest rates are going to be found in the bond and commercial paper markets and in such a case interest rates for some fairly recent US Dollar issues have been about 5 percent for 3 years, and up to 8 percent in Dominican Pesos for about 10 year terms. While there are occasionally issues denominated in Euros, Dominican Peso and US Dollar denominated investments are going to be more commonly available.
Can I Get Direct Deposit To My Dominican Bank Savings Account?
Yes, all depending if the paying party is willing to process the payment for you. In essence, this would work the very same way as any other direct deposit with the exception being an extra subset of instructions for the recipient correspondent bank to know how to apply and report the credit to your Dominican Republic Bank.
Am I Required To Keep All Of My Funds In Dominican Pesos?
No, clients can open either a Dominican Peso Account, a US Dollar Account, A Euro Account, or combination of these. There is no requirement that foreigners or legal residency open or hold any one particular kind of currency account. However, as we mentioned previously, since most of the banks will only issue a Visa Debit Card that is connected to a Peso Savings Account, if you want to have a debit card, then you will need to open a Dominican Peso Savings Account.
Aside From Performing A Wire Transfer In US Dollars or Euros, Can I Get A Bank Check In These Currencies Payable To Myself or A Third Party?
YES. Any bank that offers US Dollar or Euro Accounts can issue a bank check drawn off their foreign bank correspondent account (which means a US bank for US Dollars and a European Bank for Euros). This can be convenient for clients that have a business and would prefer to pay suppliers by check in these respective countries and currencies. The recipient of such checks will have no problem clearing them because they will be issued off the Dominican Bank's local correspondent bank located in that other country or jurisdiction.
John Schroder is the author of this article and his firm, Ascot Advisory Services, has been assisting clients for 17 years in The Dominican Republic with residency applications, citizenship applications, banking and investment accounts, and other legal services (real estate contracts and title transfer, company formation services)