Is it safe to deposit money in the DR banks, and what type of interest can I expect?

Jason cbt

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Jan 1, 2009
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I am thinking of moving to the DR, and was wonering about banking. I had previously spoken with someone who told me that putting $100k in the bank would earn enough interest to live on? Or at the least be a source of income? Any help would be appreciated, thank you guys in advance.

Jason:glasses:
 

Castellamonte

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Mar 3, 2005
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The interest rate of 18% is there because you are shouldering the risk of currency fluctuations. Be very careful about this. Know what you are doing and don't just 'wing it' because you will loose your butt.

Deposit: $3,450,000 RD
Exchange: 34.5 RD : 1.0 USD
Interest: 18%
Target ROI: $621,000 RD (Y1)

The above looks like you'll make about USD $18,000 in the first year alone! But how about if the exchange rate changes? Your interest AND your principal are at risk in this.

I've done okay at this but it is not for the faint of heart. Take care.
 
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Aug 25, 2008
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Just a warning

According to the Listin Diario (national newspaper), the Banco Central has just announced that it will be lowering interest rates - so far only on short-term deposits from banking institutions, but it may be a sign that it will be adjusting CD rates too. Just something to take into account...
 

sweetdbt

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Sep 17, 2004
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One way to "hedge" against exchange rate fluctuations is to diversify and have accounts in at least one foreign currency (dollars, euros, etc.) as well as pesos. It is possible to get 14% on US dollar accounts at some DR investment houses. I am not aware of any banks giving comparable rates.
 

sweetdbt

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As of October that rate was available for US dollar accounts over a certain amount at a well known North Coast investment house.
 

sweetdbt

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the Lombarda has been cut from 16% to 14%

You're gunna have to tell us what a Lombarda is. I've never heard of it, and a search reveals that this is the first and only time the word has been used on this board.
 

PICHARDO

One Dominican at a time, please!
May 15, 2003
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Both cuts in interest rates are inter-banking lending only; it has zero (0) to do with actual rates related to the ones offered by the CDs or yields for savings of any kind.

In fact, the current cuts to interests to both fields will create higher yields in the long run to unrelated rates, as the CB can disburse higher amounts to the local banks with a comparable higher ROI due to volume in transactions done.

A given Bank can ask another Bank to provide a loan to invest on a deal or to complete the required reserve minimum on hold in the CB. The CB just made what the FED does in the US; it lowered the rate at which the DR's Banks loan to each other funds thus enabling a quick jump on the economy. This comes at the price of inflation! As the Banks loan to each other, the only solid guarantee the loaning Bank holds is the reserves from the loaned to Banking institution there. If the collateral is deemed less than the outstanding value of the loan, both Banks could be in big trouble and the CB must step in to correct any damages that could reflect negatively in the economy.

The thing that happened before with Baninter and others is the same effect, both requested loans that surpassed the collateral interest for such outstanding notes. As one Bank was unable to collect the yield, much less the actual loan capital, the damages hit the other non-related institutions as the CB had to step in to avoid a domino collapse of the Banking institutions unrelated to the primary default.

I told you that the CB reserves were going to be used to ease up the congestion of loans not reaching our deprived internal economy. By lowering the rates the CB in effect is creating the way so that Banks can borrow money for short term high yield loans to clients, and yet still provide security to the overall economy still recovering from the inflationary trends.

The CB will soon also roll out a phase to have local Banks tap the reserves as collateral to disburse loans to the clients at lower interest rates with easy terms. All this with the CB providing the backbone to any defaulted loans.
Providing a way for more people to obtain car and home loans.

One thing we're not doing is basing our internal economy solely on consumerism as the US, but actual solid investments in a controlled economy of sorts. Think how the RE value in the DR retains the equity gained with less loses than the comparable US and EU markets.

Or, you could join the line of "some" people waiting to buy Cap Cana's properties with pennies on the Dollar... LOL!!!!

I think that the cuts were not aggressive enough as it was discussed, but something is better than nothing at all...
 

korejdk

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Dec 29, 2006
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Both cuts in interest rates are inter-banking lending only; it has zero (0) to do with actual rates related to the ones offered by the CDs or yields for savings of any kind.

so you're saying that banks would pay the CD holders at 16% while lending the funds at 14% ?
 

PICHARDO

One Dominican at a time, please!
May 15, 2003
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CDs are one thing and the interbanking rates quite another!
The CDs are NOT short term yields like the interbanking loans with the CB at the middle. These loans are not a liquid infusion for the Banks in question to get funds in order to build huge hotels or AI. They are meant to allow Banks to meet the minimum reserves requirement adopted by the CB regulations. Banks that get loans from other Banks as described do so for very short term funding needs. Think of them as no more than 30 days or less for the longest term of the ones that rates got cut for.

These have ZERO effect on interest rates paid out by the Banks to account holders or investors from capital invested or loaned by the institutions elsewhere. That's why CDs have terms to reap yields.

Short term loan rates at the banking level only affects big commercial clients at the time of requesting short term LOCs.

You're in fact confusing two completely different capital values with one another.
 

jenniejayne

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Dec 31, 2008
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So, the CD's are a good thing and are generally unaffected by fluctuating rates? And where can I get some info on these CAP CANA properties????? Haha
 

PICHARDO

One Dominican at a time, please!
May 15, 2003
13,280
893
113
Santiago de Los 30 Caballeros
So, the CD's are a good thing and are generally unaffected by fluctuating rates? And where can I get some info on these CAP CANA properties????? Haha

Your CDs are affected by the exchange rates greatly, as the yield can become even lower if things take a turn for the worst on a tail spin of the economy in the DR. But as historically provided and experienced by CDs investors in the DR, the economy still provides better value than parking money in overseas accounts.

As some poster indicated is a best bet to diversify your holdings across several currencies and economies just to play it safe...