Financial Sector Technical Assistance Credit

closed

The proposed project will support the development of the institutional capacity of the Comision Nacional de Bancos y Seguros (CNBS) and the Banco Central de Honduras (BCH) to address vulnerabilities of the Honduran financial system. The objectives of this component are: A. (i) establish a conducive framework for an improved soundness of the Honduran financial system, (ii) facilitate the market exit of the weakest / non-viable banks, and (iii) contribute to the institutional strengthening of the CNBS. B. Under this component, the project will carry-out an upgrade of the current systems, including the launching of a special purpose large value payments system that will allow for the separation of large and low value payments and the establishment of a securities depository function. C. The suggested component will focus on three aspects of the financial system infrastructure: (i) the institutional framework for Anti Money Laundering activities & Combating Financing of Terrorism (AML/CFT), (ii) the oversight of the corporate sector and effectiveness of insolvency proceedings, and (iii) the policy instruments used to facilitate access to finance by small agricultural producers. D. Under this component, the project will finance the salaries of project staff, operational expenses (including audits, local transportation and travel, etc.), training and limited equipment. E. An unallocated reserve of about 4.5% of the total project costs (US$ 0.49 million equivalent) has been set to allow for a limited level of flexibility in project implementation.