Strengthening Financial Regulation in Cambodia: A Step Towards Stability
PHNOM PENH - In response to the rapidly growing finance sector, Cambodia’s National Bank (NBC) has taken significant steps to upgrade its supervision structure, improving compliance with international standards. This move is part of the country’s efforts to strengthen financial regulation and oversight.
Upgrading Supervision Structure
The NBC has upgraded its supervision structure to meet international standards despite challenges in securing qualified human resources. The bank is responsible for regulating all banking activities in Cambodia, which are governed by a comprehensive legal framework consisting of several laws and sub-decrees issued since 1996.
Key Responsibilities:
- Grant operating licenses to banking institutions
- Oversee the payments system
- Conduct monetary policy
Sectoral Supervision and Joint Oversight
While sectoral supervision prevails over consolidated supervision, the NBC, Ministry of Economy and Finance (MEF), and Securities and Exchange Commission of Cambodia (SECC) are working towards joint or coordinated supervision. A memorandum of understanding on establishing information sharing was signed by the MEF, NBC, and SECC in July 2014.
Cambodia’s Banking System
The country’s banking system comprises:
- Commercial banks
- Specialized banks
- Microfinance institutions
- Rural credit institutions
- Financial lease companies
- Third-party processors
- Payment service institutions
Key Features:
- Specialized banks operate similarly to finance companies, providing credit facilities without collecting deposits.
- Microfinance institutions are generally not permitted to accept deposits unless they have obtained a separate license from the NBC after fulfilling certain conditions.
Increased Minimum Capital Requirements
The NBC has recently raised the minimum capital requirements for commercial banks and microfinance institutions. The new minimum capital requirements are as follows:
| Institution | Previous Minimum Capital | New Minimum Capital |
|---|---|---|
| Commercial Banks | US$37.5 million | US$75 million |
| Foreign Bank Branches (non-investment grade) | US$37.5 million | US$75 million |
| Foreign Bank Branches (investment grade) | - | US$50 million |
| Microfinance Institutions | US$62,500 | US$1.5 million |
| Deposit-taking Microfinance Institutions | US$2.5 million | US$30 million |
Conclusion
Cambodia’s move towards strengthening its financial regulatory bodies aims to improve the sector’s stability and resilience in the face of rapid growth and increasing complexity.