Taken from the Listín Diario
SANTO DOMINGO. – The Dominican Republic's Association of Multiple Banks (ABA) indicated that whenever the Central Bank's Monetary Policy Rate changes, the interest rates of the financial system also change, but this time the situation is different because the loans granted in the liquidity facilities process will remain the same until June 2023.
“On this occasion, since we come from a process of monetary easing and liquidity facilities in the context of the pandemic, all those loans restructured and refinanced or granted under those stimuli were granted at rates up to 8% that must remain until June 2023, given that the Monetary Board approved it with that condition for three years at a fixed rate,” explained the president of the ABA, Rosanna Ruiz.
He argues that, therefore, the transmission channel for that proportion of the bank portfolio will not have an upward effect on those debtors in the productive sectors. He noted that more than 50% of the 2020 portfolio was subject to restructurings and refinancings.
Contracts
Regarding the other portion of the non-restructured portfolio, the behavior will depend on what was agreed.
With this 100 basis point increase in the monetary policy rate, bringing it back to pre-pandemic levels, it is expected that the normal transmission channel will be activated and that increases in interest rates will begin to be registered gradually, both for depositors' deposits and for borrowers' loans.
"The underlying objective of this monetary policy stance is to control inflationary pressures, for which we seek to avoid growth in consumption and investment above potential," he stressed.
It is expected that the normal transmission channel will be activated and that increases in interest rates will begin to be recorded gradually, both for depositors' passive rates and for borrowers' active rates.
The Central Bank of the Dominican Republic (BCRD), in its monetary policy meeting of December 2021, decided to increase its monetary policy interest rate by 100 basis points, from 3.50% per year to 4.50% per year.
Thus, the rate of the permanent liquidity expansion facility (1-day Repos) increases from 4.00% per annum to 5.00% per annum and the rate of remunerated deposits (Overnight) from 3.00% per annum to 4.00% per annum.
This decision regarding the benchmark interest rate is based on a comprehensive assessment of the impact of Covid-19 on the global economy and the persistence of externally driven inflationary pressures.
According to the Central Bank of the Dominican Republic (BCRD), the inflation rate was driven by rising oil prices and other raw materials crucial to local production, as well as increased global freight costs due to container shortages and other supply chain disruptions. Accumulated inflation reached 7.71% in the first eleven months of 2021.
As of last November, the behavior of active interest rates (for loans) was at an average of 8.15% in the commercial sector, 14.0% for consumer and/or personal loans, and 8.9% in credits.
On November 29, 2021, business customers negotiated rates of 9.95%, consumer users and those seeking personal loans negotiated interest rates of 14.94%, purchasers of homes and buildings with mortgage and/or personal loans negotiated average rates of 9.28%, and preferred customers at 7.72%.
The passive rate is applied as the profit of the owners of the money, in installments, to savings deposits and in an interbank manner.
Provisions
The first measures of the Central Bank of the Dominican Republic (BCRD) were aimed at boosting productive sectors by offering liquidity through the banking system
November
During November the IMAE grew year-on-year by 13.1%, higher than expected and well above the 12.5% achieved in the first eleven months of this year and pre-pandemic levels.
2021
According to preliminary reports of the Monthly Economic Activity Index (IMAE), GDP growth of over 12% was projected.
