do business in the Dominican Republic - Pellerano & Herrera

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MONETARYAND FINANCIALSYSTEM1LEGALFRAMEWORK:LAW 183-0214MONETARY AND FINANCIAL LAWIn the year 2002 ended the process of approval of the new legal framework formonetary policy and banking business in the Dominican Republic, which formore than half a century had been regulated by the laws resulting from the financialreform of 1947.Thus, on 16 November 2002 the Monetary and Financial Law No. 183-02 waspassed, which is the result of a consensus reached among very diverse sectors ofthe public and private financial levels of the national and international community,after an intensive consultation process.OVERVIEW OF THE LAWThe Monetary and Financial Law is divided into four parts:Title I on “Regulatory and Institutional Framework”This part contains the regulation principles of the monetary and financial system,the basic organizational norms of the Monetary and Financial Administration, andtransparency rules.Title II on “Regulation of Monetary System”This title deals with currency regulations and monetary issue, open market operations,inter-banking market, management of international reserves, legalreserves, payment and compensation system, foreign exchange regime and loanfacilities of the Central Bank as lender of last resort.Title III on “Regulation of Financial System”These provisions set out the types of institutions subject to regulation, their legalregime and special corporation rules, the admission of foreign entities, descrip-
Pellerano & HerreraAttorneys at lawtion of operations that are allowed, subject to authorization and prohibited, prudentialnorms, bank transparency, forms of supervision, bank regulation and liquidation,and sanctions.Title IV on “Additional, Final,Transitional and AbrogationProvisions”These provisions enable to connect the law with other related areas and providethe necessary rules to conform the current situation to the new standards.PURPOSE OF REGULATIONThe law provides that the purpose of monetary regulation is to maintain pricestability, which is indispensable for national economic development, while thepurpose of financial regulation is to see to the compliance with the liquidity, solvencyand management conditions set forth in the law by entities of financialintermediation, in order to ensure the normal functioning of the system in anenvironment of competition, efficiency and free market (Article 2).15MONETARY AND FINANCIAL ADMINISTRATIONLaw 183-02 adopts the organization concept of Monetary and FinancialAdministration, which includes the Monetary Board, the Central Bank and theSuperintendence of Banks, and which in an organized manner, is granted theexclusive attribution to regulate the monetary and financial system throughoutthe national territory.a) Monetary BoardThe Monetary Board is under the Constitution the regulatory body of the financialand monetary system, and the higher organ of the Central Bank and theSuperintendence of Banks.It has the following functions:To determine the nation's monetary, exchange and financial policies.To adopt monetary and financial regulations for the application of the law.To grant and revoke authorizations to operate as financial entity, and toauthorize mergers, acquisitions, etc. among entities.To designate, suspend or remove employees of the Central Bank andSuperintendence of Banks.To decide on appeals filed against decisions of the Central Bank and theSuperintendence of Banks.The Monetary Board is also entitled to adopt regulations of general applicationto regulate the monetary and financial system. In this regard, the law improvesthe conditions of exercise of the faculty of regulation of the Board, which is subordinatedto the law.The regulatory measures of the Board may be subject to the control of the courtwhen appeals are filed against a decision issued by virtue of such regulations.This body shall be composed as follows:
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