do business in the Dominican Republic - Pellerano & Herrera

DOING BUSINESS INTHE DOMINICAN REPUBLIC32LAW 92-04 ON BANK RISK PREVENTIONBackgroundThe Monetary and Financial Law No.183-02 was published on 3 December 2002.Its main purpose is to regulate the monetary and financial system of the nation,for which it is necessary to maintain price stability and to ensure that financialentities comply with the minimum liquidity, solvency and administrationrequirements set forth in the law.This with the aim to ensure the normal functioningof the system in an environment of competitiveness, efficiency and freemarket.However, after the collapse of some of the financial entities conforming theDominican bank system, an extraordinary legal framework became necessary inorder to complement Law 183-02 and thus prevent the occurrence, or minimizethe effects, of further similar situations.In this regard, Law 92-04 was published on 4 February 2004, which created theExtraordinary Program of Risk Prevention for Financial Entities.ObjectivesThe main objectives of this statute are to enhance the attributions of theMonetary and Financial Administration, and to see to the compliance of liquidity,solvency and administration requirements by financial entities.To reach its aim, the statute sets forth the Extraordinary Program of RiskPrevention for Financial Entities (hereafter “the Program”) through the creationof a fund to channel public and private contributions. The objective of thisProgram is to protect depositors and to prevent the risk of a system failure,whichmay adversely affect the payment system and the provision of basic financialservices as a whole.Implementation and Functioning of the ProgramIn order to execute the Program, the Central Bank created the Fund for BankConsolidation (hereafter “the Fund”), which has the following purposes: a) bankcapitalization and/or restructuring of assets; b) asset compensation; or, in the lastinstance, c) guarantee of deposits.The Fund shall be managed by the Central Bank and shall be solely used for thepurposes, and according to the procedures, established in the law. It is a separatefund, formed of mandatory contributions of financial entities and other sources,as provided in the law. This Fund shall have a separate accounting and independentlegal personality. It is under the management of a board of directorscomposed of five members appointed on a honorary basis by the MonetaryBoard and governed by the regulations of this Board.The Program may come into application when a financial entity is facing difficulties,whether related to solvency, viability, liquidity or non-compliance byshareholders of capitalization goals within the terms provided in the regulationfor conformation of capital or in its regularization plans.Here, if the Superintendence of Banks considers that there are clear indicators