Cambodia’s BFI Law Under Fire: Experts Decry Lack of Transparency and Uncertainty

Phnom Penh, Cambodia - A Recent Review Raises Concerns

A recent review of Cambodia’s Banking and Financial Institutions Law (BFI Law) has raised concerns about the lack of transparency and uncertainty surrounding the country’s financial regulations.

Lack of Transparency and Uncertainty in the BFI Law

Experts point out that most Cambodian statutes include provisions that can repeal existing laws without any reference to the original legislation. This “Article 75 type” provision, they say, creates a risk of invalidating perfectly valid operating laws, contributing to a greater level of uncertainty and lack of transparency in Cambodia’s legal framework.

History of Changes in Cambodia’s Legal Infrastructure

The problem is particularly acute in light of Cambodia’s recent history, which has seen significant changes to its legal infrastructure since independence from France in 1954. The destruction of all laws, treaties, and related documentation during the Khmer Rouge regime in the 1970s made it necessary for officials to include Article 75-type provisions in new laws to ensure continuity.

Uncertainty and Challenges for Businesses and Investors

However, experts argue that this approach may not be sustainable in the long term, particularly given the pace of change and reforms in Cambodia’s legal infrastructure. The uncertainty created by these provisions could lead to difficulties in determining which laws are actually applicable, making it challenging for businesses and investors to operate in the country.

Recommendations for Revisions to the BFI Law

The review also highlighted the need for revisions to the NBC Law, which governs banking and financial institutions in Cambodia. With the establishment of the Securities Exchange Commission of Cambodia (CSEC) under the new Securities Law, there is a need for clarification on the role of the NBC in licensing and supervising securities activities.

Additionally, experts have called for the development of a new Law on Cooperatives to facilitate the operations of credit unions and cooperatives in Cambodia. The current lack of a legal framework for cooperatives hinders the growth of these organizations, which could play an important role in promoting financial inclusion and rural development.

Specific Changes Recommended

The report recommends specific changes to the BFI Law to address these concerns, including:

• Deletion of Article 75-type provisions
• Introduction of a “double license approach” for securities activities carried out by banks
• Revision of the NBC Law to reflect the regulatory framework for securities activities and the supervisory powers of the NBC

Full Report Available Upon Request

The full report, which includes detailed recommendations for updating the BFI Law, is available upon request.