Former general manager of the Central Bank, Apolinar Veloz, revealed that the Central Bank has chosen to disregard suggestions from the International Monetary Fund (IMF) that would have mandated the forced closure of Baninter and permitted an organized process of dissolution of the bank and its assets. The Central Bank opted instead to bale out all the depositors, including members of the board of directors, and, in consequence, pushed the country to the worst financial crisis in its history. Veloz, nevertheless, defended the bank’s actions, saying that “at the time, there was no time to take a more thought-out decision.” By going against the IMF’s recommendation, the Central Bank broke the Monetary and Financial Law 183-02 and decided to pay depositors way over and above the RD$500,000 guaranteed by the Law. Sums of over one million dollars were paid out to Baninter depositors who held “off-shore” accounts with the bank. Such deposits were not even contemplated in the law. Huge sums were even paid out to the members of the Administrative Council who, in theory at least, were responsible if the bank should encounter difficulties. Veloz gave his statements to the Hoy newspaper in response to commentaries made by Julio Ortega Tous, the President’s economic advisor, about the lead-up to the bank crisis of 2003.
As reported in Clave Digital online news service, Veloz explained the authorities had to make decisions such as whether to return the RD$800 millon deposit of Sammy Sosa and the RD$60 million of the Fundacion Global, the think tank center of then former President Leonel Fernandez.
The Panel of International Experts assigned by the IMF to look into the crisis and its causes gave a press statement that put it at odds with statements made by Dominican Banking Association (ABA) officials, who said that the accounting practices found at Baninter and Banco Mercantil were unique to these institutions and the ABA did not know about the double bookkeeping that was going on.
The report submitted by the Panel of International Experts, revised in March 2005, and published by the Central Bank on its web page, says that such ignorance on the part of banking officials at different levels of the commercial banking establishments is just not believable. The IMF panel analyzed ABA reports and statistics relating to the factors that led up to the crisis. In Section II.2.4 of the report, referring to the private banking sector, number 75 says that “at the level of the ABA, the panel learned that the rest of the private banks, with some exceptions, feel that the situation that came about only affected the three banks, and that they were ignorant of the existence of double bookkeeping. This point of view is not shared by the panel.”
The panel, which interviewed more than two dozen leading figures from the banking community and former BC officers also stated that the “results of many of the visits carried out as well as the omission in some of the audit reports on this point (double accounting practices) but making references to non-reconcilable practices in the financial statements and, lastly, the manifest signals of the development of management practices divorced from the required behavior of the banking sector in this situation.” The report goes on to say that double entry bookkeeping was widespread, and said that the strong expansion of the credit accounts in 2003, in the face of a declining GDP was another strong indication that something was rife in the sector.