Capital Markets in the Dominican Republic
Tapping the Potential for Development
This report presents a detailed analysis of the Dominican Republic’s financial system and offers a series recommendations to develop the country’s capital markets. The country has recently made big advances in the development of its capital markets, achieving high solvency in the banking sector, improving the institutional framework for the management of public debt and experiencing steady growth in the value of both the private bond market and the assets of pension funds. However, the level of financing directed to the economy is still small, given the country’s level of development, and there are important structural challenges that need to be addressed. Both the Central Bank and the Finance Ministry issue public debt, each with different purposes, and there appears to be little coordination between the two organs in terms of rate of returns and maturity of the issued bonds. The primary market of private bonds suffers from a long and complicated issuing process that stems from coordination and communication problems among the different regulators. The bond secondary market lacks key aspects of market infrastructure. Finally, institutional investors invest mostly on public debt instruments and bonds issued by finance sector firms.
Egalement disponible en : Espagnol
The public debt market
Centre de Développement de l’OCDE
The Central Bank is the largest issuer in the domestic market, doubling the number of securities issued by the central government. The lack of co-ordination and different aims of these two operators in the issuance of internal debt lead to high interest rate differentials for the same maturity. The two institutions should maintain constant communication to co-ordinate the issue dates and features of the securities. There should also be a gradual transfer of securities to a single issuer. For the development of a private market, it is necessary to create a risk-free benchmark curve based on government bonds of the same denomination and a single issuer. In the long term, as for most countries in the region and in the OECD, government debt management should be handled by a single operator.
Egalement disponible en : Espagnol