Following its June 25, 2015 session, the Dominican Monetary Board announced and circulated the proposed amendments to certain regulations currently in force, aimed at providing access to bank credit to finance local low-cost housing projects —including road networks— and other productive sectors in general. This would eliminate the constraints for real estate projects developed under the concept of public-private and private trust.
For this purpose, the incumbents have suggested amendments to the Asset Evaluation Regulation —REA, according to its Spanish acronym—, including those that could be accepted as valid guarantees from a debtor as safeguarding for lending operations, guarantee trusts, source-of-payment trusts and any new instruments mentioned by the proposed amendments in question —such as collateral trust certificates, with a particular asset serving as an underlying collateral as specified by Article 17 of the REA, that is, one that meets the requirements of enforceability, being inalienable and measurable, transferrable without incurring in excessive costs, stable in value and insured if its nature so requires it.
As defined by Dominican Law 189-11 for the Development of the Mortage Market and the Creation of Trust, a guarantee trust has property integrated into the assets, which is intended to ensure compliance with certain obligations, concerted or arranged by the settlor or a third party —the debtor. The trustee, as a creditor, may require its execution or disposal according to the procedure disclosed in the constituent.
Any proposed amendments refer to this figure explicitly, so as to create the aforementioned guarantees and admit them within the evaluation of assets of any financial intermediaries on real estate and sources of payment —in this type of trust, the creditor is registered as a beneficiary of the payment of a debt, with any receivables ceded to a trust in order to generate future cash flow or a cash flow that benefits the settlor in the form of assured payment.
Furthermore, these proposals also seek to revise Article 6 —Limits to Individual Lending— from the Risk Concentration Regulation, anticipating the effect on financial intermediaries: They will now be able to carry out operations involving direct or indirect financing, regardless of their nature, for up to 40 percent of their regulatory capital, if the loans comply with being granted under the guarantee of the Dominican state or with funds to repay the debt from actual cash flows generated by public trusts consigned under the National Budget.
The measure would directly impact any funding to be granted to public funds created under Law 189-11 and any special laws to that effect —among them, the Trust Society for the Operation, Maintenance and Expansion of the Main Road Network in the Dominican Republic (RD VIAL).
Previously, in March of 2015, the Monetary Board had resolved to authorize the Central Bank of the Dominican Republic the use of up to RD$10,000 million from banks and savings and loans associations to finance real estate projects developed under the concept of public-private and private trust.