Compliance Requirements for Banks in Honduras: A Risk-Based Approach

The Financial Services Authority of Honduras has made a commitment to providing transparent regulatory frameworks and requirements that are consistent with international best practices, while applying and enforcing these standards sensibly and consistently in a firm but fair manner.

Risk-Based Philosophy

At the heart of its supervisory work program is the Authority’s risk-based philosophy, which ensures that its standards are calibrated to Honduras’ wholesale and domestic financial markets. This approach has been endorsed by various international regulatory bodies.

Benefits of Risk-Based Approach

• Enables effective allocation of resources
• Allows for monitoring of developments and response to external factors
• Considers the unique nature of the Honduran market

Risk-Based Supervisory Framework

To conduct its supervisory program, the Authority uses a risk-based framework that enables it to:

Four Main Components of Risk-Based Framework

• Identification: Assessing risks in the financial system
• Assessment: Evaluating the severity and likelihood of identified risks
• Prioritization and Resource Allocation: Allocating resources to address high-risk areas
• Regulatory Response: Implementing regulatory actions to mitigate risks

Benefits of Risk-Based Supervisory Process

• Early detection of problems
• Timely regulatory action
• Efficient management of entity failures, either by returning to compliance or managing exit from the market

Overall Approach

The Authority’s risk-based approach aims to strike a balance between promoting financial stability and minimizing regulatory burdens on banks in Honduras. By adopting this approach, the Authority can ensure that its regulations are effective, efficient, and tailored to the unique needs of the Honduran financial system.