Emerging Markets Rates and Currencies Handbook

96 Citi | Emerging Markets Currencies Handbook 2021 Citi in Honduras Citi started operations in Honduras in 1965, after purchasing the majority stake in Banco de Honduras, the oldest financial institution in the country with over 129 years of experience and initially serving as Honduras currency issuer prior to the establishment of the Central Bank of Honduras. Citi has offices in the country’s two largest cities: Tegucigalpa, the nation’s capital and seat of government, situated in the center of the country, and San Pedro Sula, the nation’s business and industrial center, located in the north, near the Atlantic coast. Market Overview The Central Bank (CB) of Honduras regulates the local FX market and has implemented a crawling peg exchange regime. Those looking to buy USD can participate in an FX auction sourced and managed by the Central Bank or can purchase USD directly from Banks depending on the required amount, as established by local regulation. For USD Buyers: Maximum allowed amount per day of USD 1.2MM through the auction market. A lower and upper FX band is defined daily by the Central Bank for placing a bid. For mid value transactions (lower than USD 600K), FX transactions are managed by Local Banks using a CB defined exchange rate called “Tipo de Cambio de Referencia” (TCR). For USD Sellers: There are no amount restrictions for USD sellers. All transactions are closed at a CB daily defined rate. On a daily basis, a percentage of purchases must be sold to the CB while the remainder is kept by local banks to accommodate mid value USD purchase demand by clients. The forward market in Honduras, although available, has very limited liquidity and only OTC trades are possible with a few local institutions, including Citi. Currently, there is no interdealer market and as such, any trade is usually analyzed and closed on a case-by-case basis, taking into consideration limited market capacity. Convertibility Honduran Lempira is a restricted currency with convertibility regulated by the Central Bank through a crawling peg regime. HONDURAS (HNL — Honduran Lempira)