National Bank of Cambodia Banking Sector in Cambodia

National Bank of Cambodia Banking Sector in Cambodia 13 -Nov-2002 National Bank of Cambodia

1 - Overview l Cambodian’s financial sector is at a rudimentary stage l Limited financial intermediation and low public confidence l Before 1989, Cambodia had a monobanking system which National Bank acted as central and commercial l From 1989, Government decree to separate the function of commercial banks from NBC (twotier banking system) 2021/12/31 National Bank of Cambodia 2

2 - Banking System Reform l In November 2000, to strengthen the Banking System, NBC conducted relicensing program l This program required minimum capital requirement 13 million USD for each commercial banks l Every commercial bank is subjected to be examined by Banking Supervision Department (off-site and on-site) based on CAMELS rating system 2021/12/31 National Bank of Cambodia 3

3 - Banking Structure Before relicensing program, commercial banking system consist of 31 banks, including : l 2 Government-owned banks l 22 locally incorporated banks l 7 foreign branches bank 2021/12/31 National Bank of Cambodia 4

3 - Banking Structure After relicensing program until present, commercial banking system consist of 17 banks, including – 1 state owned bank – 10 locally incorporated banks – 3 foreign branches bank – 3 specialized bank Micro Finance Institutions : 10 Licensed MFIs and 30 registered NGO-MFIs 2021/12/31 National Bank of Cambodia 5

4 - Constraints and Issues l High liquidity problem l High interest spread between loan and deposit (deposit interest rate 1 to 4% p. a and loan interest rate 12 to 20%p. a) l Limitation of banking products and services l Poor asset quality (NPL=10. 39% as at 31 March 2005) l High risk and operating cost 2021/12/31 National Bank of Cambodia 6

4 - Constraints and Issues l Lack of reliable borrower information l Collateral based lending l Ineffective of legal infrastructure l Weak supervisory capacity and regulatory framework l Inconsistent adopting of Accounting Standard 2021/12/31 National Bank of Cambodia 7

5 - Solution and progress l Strengthen and amend some regulations to facilitate commercial banks and supervisory benefit l Introduce Risk Management System to commercial banks l All commercial banks are required to adopt Cambodian Accounting Standard and Standard Chart of Account. l Strengthening supervisors’ capacity (off-site and on-site) 2021/12/31 National Bank of Cambodia 8

5 - Solution and progress l On-site staffs conduct on-site inspection on every commercial banks annually. l The banking system is more soundness and healthy after the period of restructure l As a result, public increase their trust on banking sector and participate actively in banking system. 2021/12/31 National Bank of Cambodia 9