Definition:

It contains a mix of policies taken by the Monetary Authority to determine the source and use of financial resources for the different economic agents. It could induce development in some strategic sectors of the economy; it is strictly related with the monetary policy. Even thought, it could be part of it, because both policies use similar instruments like interest rates, access to discount rate, legal reserves and some other normative topics.

Legal Aspects

In accordance to the National Constitution, the State of Honduras through the Central Bank of Honduras (CBH), is in charge of the formulation, management and execution of the monetary, exchange and credit policy in accordance with the dispositions described in the Central Bank of Honduras Law, is attribution of the Board of Directors to formulate, to manage and to emit the related normative.

Since the 90’s, one of the main goals of the Monetary Authority has been the economic restructuring, taking an economic policy with freeing market emphasis, stimulating the financing of private sector and reducing the financing of public sector

The Central Bank Law proposes that CBH only can give credits to the Government and Official Institutions through second markets. These credits cannot exceed the limits disposed by the Board of Directors. Even thought values can be negotiated with public and financial institutions.

The CBH will give credits to the Government only in emergency situations or public calamity; it will be determined in unanimity for the Board of Directors and ratified by Presidential Decree and Minister Council. At the same time the CBH could give loans to the Government to cover some variations in income and expenses according with the requirements prescripts to the law.

Referring to the goal to keep stability in the payment and financial system, the CBH will give credits to attend temporary insufficiencies of liquidity to commercial banks, loan and debts associations and financial societies, authorized to operate in accordance with the Financial System Law.

Considering the last paragraph, the CBH have done a structural reform in credit policy, assuring the approach to act on time like moneylender of last instance to the Financial System and as result, keep the normal function of the payment system. In February 2005, the Board of Directors approved the “Moneylender of Last Instance Norms to attend Temporary Insufficiencies of Liquidity”. The actual interest rate in these kinds of operations is the result to sum seven percents points (7.0%) to the average in deposit rates (excluding current account deposits).