The Baninter collapse and the Dominican Republic's 2003 banking crisis

The Dominican Republic's growth, inflation, and exchange-rate charts all break sharply around 2003, and the proximate cause was the discovery that Banco Intercontinental, known as Baninter, the country's third-largest commercial bank, had been falsifying its financial statements for years to hide losses. Liquidity problems that began in September 2002 forced the Monetary Board to take control of Baninter's operations in April 2003, and investigators later put the concealed fraud at more than 55 billion Dominican pesos, around 2.2 billion US dollars. The revelation triggered deposit runs and contagion to other large banks, including Bancredito and Banco Mercantil, which the central bank also had to intervene in. Because the central bank financed the rescue largely through monetary expansion rather than the budget, the bailout, estimated at close to 20 percent of GDP, fed directly into inflation, which rose above 40 percent, and the peso devalued by nearly 100 percent against the dollar within about a year. Real GDP, which had grown almost without interruption since 1990, contracted for the first time in over a decade, a sequence still visible as the single sharpest disruption on the country's 1980-2025 indicator charts.