Financial Crime World

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Cambodia’s Banking Regulations: A Growing Industry with Increasing Compliance Demands

The Cambodian banking sector has undergone significant changes over the past two decades, transforming from a mono-banking system to a two-tier system as the country transitioned from a planned economy to a market-based economy.

Historical Developments

The National Bank of Cambodia (NBC) launched several reforms between 1998 and 2001, including:

  • Abolition of the requirement for a 15% NBC stake in privately owned banks
  • Classification of banking and financial institutions into three categories
  • Increase in the minimum capital requirements for commercial banks

Current Banking Landscape

As of 2020, there are:

  • 52 commercial banks
  • 14 specialized banks
  • 81 microfinance institutions
  • 15 financial lease companies
  • Four third-party processors
  • One credit bureau
  • 24 payment service-providing institutions
  • 246 rural credit institutions in Cambodia

The Rural Development Bank is the only state-owned specialized bank, which services and refinances loans to licensed financial institutions.

Electronic Payment Culture

The Cambodian banking system is shifting towards an electronic payment culture as more financial institutions launch internet or mobile banking and expand their ATM networks. Financial services offered by banks are diversifying, with the introduction of products such as:

  • Trade finance
  • Payment facilities
  • Foreign exchange
  • Financial leasing

Regulatory Framework

The NBC has introduced regular updates to existing laws and new regulations, making it one of the most comprehensive legal frameworks in the country. The regulatory regime applicable to banks includes monitoring cross-border loans provided by overseas financial institutions to non-banking and financial institutions.

Challenges and Opportunities

Despite its challenges in securing qualified human resources, the NBC has continued to improve its capacity to cope with the increasing workload and complexity of the sector. Cambodia has yet to adopt a universal banking system, where additional financial services are required to operate under separate entities and be governed by different supervisory authorities.

However, the country has established the Non-Banking Financial Service Authority to monitor and govern non-banking financial services.

Banking Institutions

The banking system in Cambodia consists of:

  • Commercial banks
  • Specialized banks (operating like finance companies)
  • Microfinance institutions (generally regarded as banking for the poor)
  • Rural credit institutions
  • Financial lease companies (providing the lease of movable property)
  • Third-party processors
  • Payment service institutions

Compliance Demands

Every banking institution is required to comply with minimum capital requirements, which have recently been increased by the NBC. The article highlights the increasing compliance demands in Cambodia’s banking regulations and the need for institutions to adapt to the changing regulatory landscape.

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