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Honduras Takes Steps to Enhance Banking Security Measures

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Tegucigalpa, Honduras - The Honduran banking system has undergone significant growth and consolidation in recent years, with total assets reaching $22.828 billion in 2018.

Growth and Consolidation of the Honduran Banking System

The Honduran banking sector has grown rapidly over the past few years, but concerns about banking security measures have been raised. The National Banking and Insurance Commission (CNBS) has set a minimum capital requirement for banks operating in Honduras at 500 million Lempiras ($21 million USD).

Interest Rates and Market Size

Average interest rates for local currency loans were 13 percent in 2018, while average interest rates for US dollar-denominated loans stood at 6.9 percent. The small size of the Honduran market has limited foreign investment in the banking sector.

Regulatory Framework

The Honduran banking system has taken steps to strengthen its regulatory framework, including:

  • Adoption of a Central Bank reform law revised in 2004
  • Financial System law (Decree No. 129-2004) outlining the responsibilities of the Banking Commission and the Central Bank in supervising and regulating the country’s financial sector

Efforts to Address Money Laundering Concerns

In an effort to address concerns about money laundering, regulations for the Money Laundering Law were approved in 2016. Additionally, the Financial System law (Decree No. 160-2016) updated the country’s legal framework to align with international best practices.

Challenges and Opportunities

While the Honduran banking system has made strides in recent years, there are still concerns about the security of its financial institutions. The country’s reliance on US banks and financial institutions for a significant portion of its deposits (50.2 percent) also raises questions about the stability of the system.

Key Statistics:

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  • Total assets in the Honduran financial system: $22.828 billion (2018)
  • Average interest rates for local currency loans: 13 percent (2018)
  • Average interest rates for US dollar-denominated loans: 6.9 percent (2018)
  • Percentage of deposits held by US banks and financial institutions: 50.2 percent

Sources:

National Banking and Insurance Commission (CNBS), Honduran government reports, banking industry sources