Deposit Insurance

Chasmc

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In the U.S., the FDIC insures your deposits up to a certain amount. Do banks in the DR have any similar protection for deposits?
 

dulce

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In the U.S., the FDIC insures your deposits up to a certain amount. Do banks in the DR have any similar protection for deposits?
Google Banniter in the DR.
Based on what happened there I would say there is not much protection.
Your post may be better off in the legal section of the forum. It would limit the type of answer like mine. ;)
 

Virgo

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Google Banniter in the DR.
Based on what happened there I would say there is not much protection.
Your post may be better off in the legal section of the forum. It would limit the type of answer like mine. ;)
Maybe you should follow your own advise and google BANINTER. In this case, the government did give back the money to the bank customers. In fact, the government went beyond the call of duty by returning more money than the amount that was legally backed by the government. This eventually created a major crises in the DR.

If you think the bank failure is a Dominican invention maybe you should read about the global financial crisis of 2008 and beyond.
 

Virgo

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In the U.S., the FDIC insures your deposits up to a certain amount. Do banks in the DR have any similar protection for deposits?
Per the 2014 "Deposit Insurance Database", deposits in Dominican COMMERCIAL banks are uninsured. However, deposits in Dominican Savings and Loan associations are (since 1962).

In practice, the government de facto insure commercial bank deposits by taking over failed banks assets and giving back as much money as possible (possibly all, even if it has to make up the difference, as it did in the Baniter case, which resulted in a major financial crisis and the failure of the president's reelection bid).
 

dulce

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Maybe you should follow your own advise and google BANINTER. In this case, the government did give back the money to the bank customers. In fact, the government went beyond the call of duty by returning more money than the amount that was legally backed by the government. This eventually created a major crises in the DR.

If you think the bank failure is a Dominican invention maybe you should read about the global financial crisis of 2008 and beyond.
I apologize for spelling BANINTER wrong. I understand petty things like this irritate you.
I suggest you google BANINTER to read about the number of people that did lose their $$$$. It happened.
Anyone who thinks their money is safe in a DR bank is gullible. And... Yes it is true $$$ is unstable all over the world.
 

Virgo

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I suggest you google BANINTER to read about the number of people that did lose their $$$$. It happened.
Anyone who thinks their money is safe in a DR bank is gullible. And... Yes it is true $$$ is unstable all over the world.
Let's see what the wikipedia BANINTER article says:
"Though required by the country's Monetary Laws to only guarantee individual deposits of up to RD$500,000 Dominican Pesos (about US$21,000 at the time) placed within the country, the Dominican Central Bank (Banco Central Dominicano) opted to guarantee all $2.2B in unbacked BANINTER deposits, regardless of the amount, or whether deposits were in Dominican Pesos or American Dollars and without apparent knowledge whether the deposits were held in the Dominican Republic or in BANINTER's branches in the Cayman Islands and Panama. The subsequent fiscal shortfall resulted in massive inflation (42%) and the devaluation of the DOP by over 100%."

Other sources confirm that the government returned all the money to BANINTER depositors.

Of course some people lost money: NOT the depositors, but precisely the people who subsidized through their taxes the government actions.
 

dulce

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Virgo,
So what you are saying is that there was no problem with Baninter? Read the rest of your Wiki article. I could quote tons of stuff about the scandal but that is not my style.
Baninter was a disaster for the DR economy. There is no way you can dispute that!
I am glad I got my $$$$ out in time.
 

Virgo

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So what you are saying is that there was no problem with Baninter? Read the rest of your Wiki article. I could quote tons of stuff about the scandal but that is not my style.
Baninter was a disaster for the DR economy. There is no way you can dispute that!
Did you read the original post? The question was about deposit insurance, that is, whether bank deposits were protected in case of bank failure. I already answered above. Technically they weren't (or were only up to a relatively small amount) but the government acted as if all deposits were fully insured.

Of course it was very bad FOR THE COUNTRY. Not for the depositors.
 

dulce

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Good job Virgo
They can close this thread now. You answered the OP.
"deposits in Dominican COMMERCIAL banks are uninsured."
 
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the gorgon

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Maybe you should follow your own advise and google BANINTER. In this case, the government did give back the money to the bank customers. In fact, the government went beyond the call of duty by returning more money than the amount that was legally backed by the government. This eventually created a major crises in the DR.

If you think the bank failure is a Dominican invention maybe you should read about the global financial crisis of 2008 and beyond.
you beat me to it. apparently dulce must be talking about a different Baninter than the one with which some of us are familiar.
 

playacaribe2

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I can`t confirm or deny that there is any coverage. But I have always heard that deposit accounts were indeed covered by deposit insurance up to a certain amount. I found this page on the internet that shows coverage of the equivilant of 13,900 US in 2010.

http://www.asba-supervision.org/PEF/el-cliente-bancario/el-seguro-de-los-depositos-1.shtml

I suppose the only sure way to know would be to ask the bank.
Based on the monetary law there is insurance coverage for deposits in a nominal amount.

Nonetheless, it is neither wise nor prudent to keep more money than you are willing to lose in any DR bank.

While the Baninter depositors were all made whole by the government...even though it had no obligation to do so...that may have been a one off event....as it sent the DR into its own financial crisis....wherein it needed to be rescued by the IMF.

So the question is, why did the DR go to its knees.....when it had no obligation to do so.

Some would argue they did it to instill confidence back into a banking system that had parallel secret off the books shadow banking both on and off the island.....and that makes a plausible explanation.....but, the real reason was that 85% of the deposits were held by just 10% of the depositors. In other words some wealthy and powerful people were about to lose it all.

Enter the government, who at the behest of those rich and powerful people decided to bail out the "bank." The government and then the IMF while saving everyone, really rescued a small number of deposit holders.....who had powerful government connections.

But even they went through some anguishing times as all deposits were frozen. Sammy Sosa who shilled for the bank and who presumably had large deposits there, arrived on the Island with a bevy of lawyers demanding the immediate return of his money. He, like everyone else, had to wait until the saga played out.

Fortunately, it played out well for those wealthy depositors who had the most to lose, but it was at a cost that the DR would pay for years to come.

Bottom line......only keep what you are willing to lose in any third world, emerging economy banking system.....wealthy Dominicans know this lesson well.....and have changed their banking habits accordingly.


Respectfully,
Playacaribe2
 
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Virgo

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Based on the monetary law there is insurance coverage for deposits in a nominal amount.

Nonetheless, it is neither wise nor prudent to keep more money than you are willing to lose in any DR bank.

Bottom line......only keep what you are willing to lose in any third world, emerging economy banking system.....wealthy Dominicans know this lesson well.....and have changed their banking habits accordingly.
You made some valid points. Yet made the mistake often made around here: to NATIONALIZE anything and everything bad. It is not a personal or institutional problem...it is a Dominican problem.

Yet, the actual record shows otherwise. Do you know of ANY depositor that has EVER lost money because of a Banco Popular failure? If you do let us know. I don't recall that bank having EVER had any abnormal liquidity problem. I reckon their record is MUCH BETTER than that of many banks in the 'developed' world.

Choosing a bank is like most things: to do it right you must do serious research focused on the SPECIFIC individuals involved...not on everyone that lives near them, or was born near them, or shares a passport with them...but THEM, the specific individuals.

The way the people running BANINTER behaved, their bank's failure isn't suprising and could have been predicted.

On the other hand, see my comments on Banco Popular above. Banco del Progreso may be an even better choice, because the Vicini family is their main shareholder, and actually used their money to back depositors a few years ago when an unscrupulous officer cheated the bank (the only people to lose money were the bank owners, as it should). The Leon family is behind the BHD/Leon. If you don't know who the Vicinis and the Leons are, maybe you should find out, before lumping all Dominicans banks together.

And while you are at it, make sure to read about the recent global financial crisis and other crises of the past...and who caused them!
 

playacaribe2

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You made some valid points. Yet made the mistake often made around here: to NATIONALIZE anything and everything bad. It is not a personal or institutional problem...it is a Dominican problem.

Yet, the actual record shows otherwise. Do you know of ANY depositor that has EVER lost money because of a Banco Popular failure? If you do let us know. I don't recall that bank having EVER had any abnormal liquidity problem. I reckon their record is MUCH BETTER than that of many banks in the 'developed' world.

Choosing a bank is like most things: to do it right you must do serious research focused on the SPECIFIC individuals involved...not on everyone that lives near them, or was born near them, or shares a passport with them...but THEM, the specific individuals.

The way the people running BANINTER behaved, their bank's failure isn't suprising and could have been predicted.

On the other hand, see my comments on Banco Popular above. Banco del Progreso may be an even better choice, because the Vicini family is their main shareholder, and actually used their money to back depositors a few years ago when an unscrupulous officer cheated the bank (the only people to lose money were the bank owners, as it should). The Leon family is behind the BHD/Leon. If you don't know who the Vicinis and the Leons are, maybe you should find out, before lumping all Dominicans banks together.

And while you are at it, make sure to read about the recent global financial crisis and other crises of the past...and who caused them!
I appreciate your comments, but my advice still stands.

And thank you for the banking history ownership.....but I already knew that...as well as being married to a family member of one of the banks founding families you mention.

Additionally, as a director of a financial institution in the US and Chair of its Credit Committee....I am concerned whether the DR banks would be able to pass a stress test of their balance sheets.

Finally, I am uniquely aware of the financial crisis and its causes....thus my advice regarding the amount of money one should keep in a DR bank.


Respectfuly,
Playacaribe2
 

bayaguanaman

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does this therefore mean that the depositors who have accounts with the cooperativas are insured on an open ended basis ? ie regardless of the amount on deposit.
 

dulce

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Based on the monetary law there is insurance coverage for deposits in a nominal amount.

Nonetheless, it is neither wise nor prudent to keep more money than you are willing to lose in any DR bank.

While the Baninter depositors were all made whole by the government...even though it had no obligation to do so...that may have been a one off event....as it sent the DR into its own financial crisis....wherein it needed to be rescued by the IMF.

So the question is, why did the DR go to its knees.....when it had no obligation to do so.

Some would argue they did it to instill confidence back into a banking system that had parallel secret off the books shadow banking both on and off the island.....and that makes a plausible explanation.....but, the real reason was that 85% of the deposits were held by just 10% of the depositors. In other words some wealthy and powerful people were about to lose it all.

Enter the government, who at the behest of those rich and powerful people decided to bail out the "bank." The government and then the IMF while saving everyone, really rescued a small number of deposit holders.....who had powerful government connections.

But even they went through some anguishing times as all deposits were frozen. Sammy Sosa who shilled for the bank and who presumably had large deposits there, arrived on the Island with a bevy of lawyers demanding the immediate return of his money. He, like everyone else, had to wait until the saga played out.

Fortunately, it played out well for those wealthy depositors who had the most to lose, but it was at a cost that the DR would pay for years to come.

Bottom line......only keep what you are willing to lose in any third world, emerging economy banking system.....wealthy Dominicans know this lesson well.....and have changed their banking habits accordingly.


Respectfully,
Playacaribe2
Thank you for the excellent post. There is no doubt that the Baninter scandal changed the way people approached banking in the DR.
We would have to start a whole new thread to cover all the details. Thanks for taking the time to add more details.
 
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Virgo

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Thank you for the excellent post. There is no doubt that the Baninter scandal changed the way people approached banking in the DR.
We would have to start a whole new thread to cover all the details. Thanks for taking the time to add more details.
I'll have to correct you again. The BANINTER case was very bad for the tax payers. For the bank customers it was largely a nonissue. In fact, if the same had happened in the US (and banks have failed and do in the US) the most each would have received was $100K or whatever the insured limit was...they would NOT have received the entire deposit (if it exceeded the limit) as they did in the DR.
 

Virgo

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I appreciate your comments, but my advice still stands.

And thank you for the banking history ownership.....but I already knew that...as well as being married to a family member of one of the banks founding families you mention.

Additionally, as a director of a financial institution in the US and Chair of its Credit Committee....I am concerned whether the DR banks would be able to pass a stress test of their balance sheets.

Finally, I am uniquely aware of the financial crisis and its causes....thus my advice regarding the amount of money one should keep in a DR bank.
You are entitled to your advise. However, it is full of contradictions.

If you do know the causes of the financial crisis, advising people to take their money to the very place(s) that caused the whole debacle is at best puzzling. The financial crisis was NOT caused by Dominican banks or institutions. How can that crisis lead you to advise against Dominican banks?

Most importantly, why do you insist in lumping together "DR banks" as if they were identical? I already explained that some of them have a very solid track record and/or are backed by wealthy and reputable families. Others less so. Each should be evaluated on its own merits, just like evaluating the creditworthiness of an individual.

Your position is the equivalent of saying that when evaluating the creditworthiness of a potential customer one should solely look at their nationality (or their citizenship/race/height, etc) as opposed to the specific details of the financial and historical profile being considered.
 

playacaribe2

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You are entitled to your advise. However, it is full of contradictions.

If you do know the causes of the financial crisis, advising people to take their money to the very place(s) that caused the whole debacle is at best puzzling. The financial crisis was NOT caused by Dominican banks or institutions. How can that crisis lead you to advise against Dominican banks?
I never advised "people to take their money to the very place(s) that caused the whole debacle"...presumably you are referring to the US. So that statement is an inaccuracy.

What I did say.....and still stand by....is;

"Bottom line......only keep what you are willing to lose in any third world, emerging economy banking system.....wealthy Dominicans know this lesson well.....and have changed their banking habits accordingly."


Most importantly, why do you insist in lumping together "DR banks" as if they were identical? I already explained that some of them have a very solid track record and/or are backed by wealthy and reputable families. Others less so. Each should be evaluated on its own merits, just like evaluating the creditworthiness of an individual.
To your point...the banks are not identical. And the average consumer has very little knowledge of the strength or health of any financial institution in the DR, witness the number of wealthy people who relied on Baninter. Your explanation may carry weight inside your circle of friends, but there are millions of others who have no idea of the strength or health of Popular, Progresso or BHD.

While those banks may be independent.......they are also interdependent. No bank, wherever located can operate without being affected by events, locally, nationally and internationally.

And when those events happen.....how a banking a system and the regulators handle the situation is what gives the bank and banking in general its credibility....to wit;

When Baninter collapsed, neither did the government nor any of the other banks step in to shore up the bank. I am told that is because none of the banks had the capital......nor did the government. That collapse, of one banking entity......not the whole financial system....brought the country to its knees.....lifelined by the government who paid depositors after enough time passed, enough protest and of course, the powerful people convinced the government to rescue the depositors.....who in turn was rescued by the IMF.

And the collapse of the much smaller Peravia, Bancredito, Mercantil are almost carbon copy....without the rich and powerful influence.

In comparison, when a US bank is failing, depending on its size, it is immediately placed into receivership or merged with another financial institution.

Regulators come in at closing time on Friday.....and by the opening on Monday morning the bank is operating as usual either under its own name or as the name of the acquiring entity.

Nonetheless, even if that did not happen, deposits of up to $250,000 per depositor are fully insured. Such is not the case for any bank in the DR, even those who appear to be foreign entities, i.e., ScotiaBank.

Your position is the equivalent of saying that when evaluating the creditworthiness of a potential customer one should solely look at their nationality (or their citizenship/race/height, etc) as opposed to the specific details of the financial and historical profile being considered.
Again, my position is not that people should look specifically at the strength of a bank (not even sure how to accomplish this in the DR by the average citizen)......but at the strength of the banking system.

Finally, the IMF put out a study titled "Systemic Banking Crises" wherein they cite that Baninter, Bancredito, Mercantil were one of the world's major banking fraud cases.....not incompetence......not greed.......but outright fraud.

And if you look at the strength of the entire banking system in the DR.....including the creditworthiness of the government backing it.....and its past track record......then if for nothing more than your own personal piece of mind......my advice given above still stands.

Respectfully,
Playacaribe2