There is no proof that there had been any issuance of paper money before the founding of the first private banks, which were established during the two last years of the 1880's. Up to that time all of the legislation, particularly the fiscal law of the Governor of Soto, refers only to coins.

In the years 1876, 1877, 1878, 1879, 1884, 1889 and 1891 there was issues of paper which embody the characteristics of money. Althought they were called bills and vouchers, they were no different from those which we today know by the name of customs notes. The issue corresponding to the last of the years cited were considered certificates representing shares of land which the President of the Republic negotiated in obtaining resources, already confiscated or given as securities.

The banks alluded to above were, in order of founding, the Nacional Hondureno and the Centro-Americano. Both were authorized on October 6, 1888, having begun to operate in November and December, respectively, of that year.

Such institutions were given the right to issue sight drafts with three principal limitations: 1) The total issue could not exceed twice the capital subscribed; 2) The banks had to always maintain bullion in their coffers of a value equal to at least 40% of the bills in circulation; and 3) They had to subject themselves to inspection by the Secretary of Property ["Secretaria de Hacienda"], who could be present at an inspection monthly and conduct the matter in whatever way he found convenient. By virtue of this control, the Ministry of Property [State?] places his signature on the bills. These enjoyed unlimited free power, as if it were their own government, since their own government received them for their nominal value in all offices of the government of the republic.

Scarcely one year after the creation of the two banks, the present day Bank of Honduras was founded. This bank assumed the fiscal obligations of the original institutions.

During its short life, the Banco Nacional Hondureno had put into circulation bills with a value of 198,000 pesos, while the Banco Centro Americano had issued 46,200 pesos.

The Banco de Honduras, taking advantage of the bills already printed by the institutions it replaced, put into circualtion between 1890 and 1901, 307,300 pesos of notes of Banco Centro Americano, and between 1904 and 1906, 10,000 pesos of the Banco Nacional Hondureno.

Later, in 1912, two other banks appeared, Comercio and Atlantida, to which was also granted the right to issue bills. The circulation of bills of these institutions was limited to twice the subscribed and paid capital, but in no case more than double the amount in the coffers; and the bills were payable in lawful gold coins, or silver of equal condition.

In 1914, the Banco Atlantida obtained an emendment to its concession, in which at the same time it reduced its issue rights by 15% and was permitted to pay gold notes in .900 fine silver. In 1917 the Banco Atlantida took over the Banco de Comercio, and from then until 1950 only its bills and those of the Banco de Honduras circulated.

Courtesy: Celso Matamoros and Raul Castillo