Honduras First Programmatic Financial Sector Development Policy Credit

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The Programmatic Financial Sector Development Policy Credit Project is the first operation of its kind, to be implemented in two phases. The first phase will support financial sector institutional development, through reforms in the following five areas: a) strategy for the management of systemic risks, b) legal and regulatory framework, c) anti-money laundering, and prevention of terrorism financing, d) strengthening of supervision, and control of systemic risks, and, e) payments system. A second phase that would partially fund a systemic consolidation strategy, would be triggered by key indicative actions such as: a) private consensus on a consolidation strategy, b) demonstrated practical relevance of the institutional development supported by the first phase; and, c) a diagnosis of the solvency position of the largest banks. The project will support sorely needed institutional development in key areas affecting the financial sector, and will also strengthen the dialogue between the Bank and Honduras, placing the Bank in a better position to assist in the financial sector's consolidation process. While there is little risk that actions required under the first project might not be taken, there is however, the need for substantial additional reform, built on solid analytical work and consensus among stakeholders, required to support the following second operation.