Navigating a Shifting Landscape: Interest Rate Adjustments and Financial Stability

The Dominican Republic’s banking sector is demonstrating remarkable stability and adaptability, even as it navigates a complex global economic surroundings. Recent data from the Central Bank of the Dominican Republic (BCRD) indicates a continued downward trend in interest rates, a direct result of proactive monetary policy measures initiated in September 2024. These adjustments are occurring within a financial system that maintains robust performance indicators, signaling a healthy and resilient economy.

Declining Interest Rates: A Boost for Borrowers

The BCRD’s report for the first quarter of 2025 reveals a meaningful drop in average interest rates for loans issued by multiple banks. By the end of March, these rates had fallen to 14.77%, a decrease of 132 basis points from the 16.09% recorded in november of the previous year. This decline is attributed to the Central Bank’s strategic reduction of the monetary policy rate by 125 points during the same period.

Furthermore, the BCRD has actively injected liquidity into the financial system through measures such as redeeming RD3 billion in central Bank instruments and releasing RD$35.355 million from the legal reserve for vital sectors like housing and MSMEs (Micro, Small, and Medium enterprises). These actions are designed to stimulate economic activity and provide greater access to capital for businesses and individuals.

This trend is also reflected in specific loan categories. As a notable example, average interest rates on loans to productive sectors have decreased to 13.56%, while consumer loans have seen a reduction from 21.51% in November to 20.45%.

Financial System Strength: Key Indicators

Beyond interest rates, the report underscores the overall health of the Dominican Republic’s financial system. Net assets reached RD$3.9 billion by the end of March, marking a substantial year-on-year expansion of 10.5%. this growth is primarily driven by increases in the loan portfolio and available liquidity, reflecting a climate of confidence and economic dynamism.

Asset quality remains strong, with a delinquency rate of just 1.6%. Moreover, the coverage of provisions is exceptionally robust, standing at 185.4%. This means that for every Dominican peso in default, RD$1.85 is provisioned, providing a significant buffer against potential losses.

Profitability metrics are also encouraging. The return on equity (ROE) stands at a healthy 22.2%, while the return on assets (ROA) is 2.7%. In terms of solvency, the system far exceeds regulatory requirements, with an index of 17.57% registered in february, well above the minimum threshold of 10%.The estimated capital surplus is RD$191.269 million,further demonstrating the system’s financial strength.

“The Dominican Republic’s financial system demonstrates a remarkable capacity to absorb risks, ensuring stability and fostering lasting economic growth.”

Central Bank of the Dominican Republic, Q1 2025 Report

Public Confidence: Savings on the Rise

The report also highlights the public’s continued confidence in the financial system. Public deposits, primarily from families and businesses, totaled RD$3.4 billion, representing an annual growth of 10.2%. This increase occurred despite a decrease in the average passive rate from 10.21% to 8.91% between November and march, indicating that depositors are prioritizing security and stability over possibly higher returns.

The paid-up capital and equity reserves of financial institutions have grown by RD$41.253 million in the past year, reaching a total of RD$358 billion. This reflects a solid capital structure and a strong capacity to absorb potential risks, further reinforcing the resilience of the Dominican Republic’s banking sector.