IMF lists highs and lows of Dominican Republic’s economy

Santo Domingo.- The International MonetaryFund (IMF) published its evaluation of the Dominican economy in 2015, andreiterated a strong momentum of its economic activity, underscored by afavorable external environment and bolstered policies.

It notes however that while the Dominicanfinancial system boasts strength, it also has weak supervision and regulation fornon-banking intermediaries and cooperatives in particular. "Although thesystem is very small, according to available data, it is closely linked tobanks through proprietary channels and some institutions are as large as banks."

Thereport says weaknesses in non-bank supervision could also pose a challenge forthe fight against money laundering / countering financing terrorism (CFT).

The IMF’s conclusions highlight thestrengthening of the financial system, but notes that there are still "pocketsof vulnerability."

The report says the authorities have strengthenedthe framework of supervision and regulation, including continuous workimplementing Basel’s basic principles, risk-based supervision.

It says that despite "the financialposition of the banks is strong, the pockets of fast-growing credit, especiallyin foreign currency, deserve close monitoring."

The IMF, in its report, points out that thebanking system is highly concentrated, with around 78% of the total assets inthree banks and a nearly a third in the State-owned Reservas bank.

The IMF report indicates that the presence offoreign banks has increased since 2008, with 7 of the 17 being foreign-owned.However, their share remained relatively low, with 10% of the total bankingsystem.

It also points out that other depositinstitutions are relatively small, accounting for 10% of the total financialsystem, including savings banks, S & Ls and credit unions.

Exchange flexibility

On the exchange rate, the IMF notes that thetransition to a higher exchange rate flexibility and continued accumulation ofreserves will increase resilience to the effects of external shocks and thechallenges of monetary policy and monetary policy management.