HONDURAS: BANCO FICOHSA TO OPEN REP OFFICE IN

UNCLAS TEGUCIGALPA 000894

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, AND EB
STATE PASS AID FOR LAC/CAM
STATE PASS USTR
TREASURY FOR DDOUGLASS
STATE PASS OPIC FOR JEFFERY BARRY, DANA STRENGTH
STATE PASS EXIM FOR WAYNE GARDELLA
GUATEMALA FOR COMATT MLARSEN

E.O. 12958: N/A
TAGS: ECON PGOV SMIG HO EFIN
SUBJECT: HONDURAS: BANCO FICOHSA TO OPEN REP OFFICE IN
U.S.

REF: TEGUCIGALPA 800


1. Banco Ficohsa President and CEO Camilo Atala confirmed
to Post on April 21 that his bank has received permission
from the U.S. Federal Reserve to open a representative
office in Miami, Florida. The bank intends to open the
office this summer, with a view toward strengthening ties
with investors and strategic partners. As a representative
office, the new office will not be permitted to take
deposits but will serve as a link to Banco Ficohsa in
Honduras. Once it opens, this representative office will
reportedly be the first such office of any Honduran bank in
the United States. As reported reftel, Ficohsa already has
nine "Ficohsa Express" wire transfer offices in the U.S.,
providing remittance services to Hondurans resident in the
U.S. The Fed approval will in no way change the Ficohsa
Express operations, which will remain solely wire-transfer
services.


2. According to International Vice President Max Contag,
the capitalization of the new office is yet to be
determined but will likely be the minimum capitalization
required by U.S. law. According to Contag, quoted in the
Honduran newspaper of record El Heraldo, Ficohsa is and
will remain 100 percent Honduran capital. Contag said the
new office would seek new business opportunities for the
bank, provide balance information and other information to
clients, and inform both U.S. and Honduran businesses of
trade and investment opportunities. Under the agreement
with the Fed, the Ficohsa representative office may not
engage in banking activities.


3. President of the Honduran Central Bank, Maria Elena
Mondragon, issued a statement supporting the Fed decision,
calling it beneficial for Honduras. She went on to note
that this decision not only highlights the solidity of
Banco Ficohsa but also is an indication of Fed confidence
in Honduran prudential oversight of the banking sector.


4. While Honduran bank regulation has made significant
strides in the last year, Mondragon's comments go beyond
what the Fed actually said. In its decision, the Fed
wrote, "The Board will consider that the supervision
standard has been met where it determines that the
applicant bank is subject to a supervisory framework that
is consistent with the activities of the proposed
representative office, taking into account the nature of
such activities. This is a lesser standard than the
comprehensive, consolidated supervision standard applicable
to applications to establish branch or agency offices of a
foreign bank. The Board considers the lesser standard
sufficient for approval of representative office
applications because representative offices may not engage
in banking activities." Indeed, the Fed decision goes on
to state, "The laws governing bank supervision in Honduras
are in need of strengthening. The NCBI [Honduran National
Commission on Banking and Insurance] continues to work to
obtain additional legislation that would allow it to
supervise banks on a fully consolidated basis." (Full text
of the Fed decision is available on the Internet at
www.federalreserve.gov/boarddocs/press/orders /2005/20050420/
attachment.pdf)


Pierce