Banking Sector in Cambodia National Bank of Cambodia Banking Sector in Cambodia

National Bank of Cambodia 1- Overview Cambodian’s financial sector is at a rudimentary stage Limited financial intermediation and low public confidence Before 1989, Cambodia had a monobanking system which National Bank acted as central and commercial From 1989, Government decree to separate the function of commercial banks from NBC (two-tier banking system) 2019/1/17 National Bank of Cambodia

2- Banking System Reform In November 2000, to strengthen the Banking System, NBC conducted relicensing program This program required minimum capital requirement 13 million USD for each commercial banks Every commercial bank is subjected to be examined by Banking Supervision Department (off-site and on-site) based on CAMELS rating system 2019/1/17 National Bank of Cambodia

National Bank of Cambodia 3- Banking Structure Before relicensing program, commercial banking system consist of 31 banks, including : 2 Government-owned banks 22 locally incorporated banks 7 foreign branches bank 2019/1/17 National Bank of Cambodia

National Bank of Cambodia 3- Banking Structure After relicensing program until present, commercial banking system consist of 17banks, 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 2019/1/17 National Bank of Cambodia

4- Constraints and Issues High liquidity problem High interest spread between loan and deposit (deposit interest rate 1 to 4% p.a and loan interest rate 12 to 20%p.a) Limitation of banking products and services Poor asset quality (NPL=10.39% as at 31 March 2005) High risk and operating cost 2019/1/17 National Bank of Cambodia

4- Constraints and Issues Lack of reliable borrower information Collateral based lending Ineffective of legal infrastructure Weak supervisory capacity and regulatory framework Inconsistent adopting of Accounting Standard 2019/1/17 National Bank of Cambodia

5- Solution and progress Strengthen and amend some regulations to facilitate commercial banks and supervisory benefit Introduce Risk Management System to commercial banks All commercial banks are required to adopt Cambodian Accounting Standard and Standard Chart of Account. Strengthening supervisors’ capacity (off-site and on-site) 2019/1/17 National Bank of Cambodia

5- Solution and progress On-site staffs conduct on-site inspection on every commercial banks annually. The banking system is more soundness and healthy after the period of restructure As a result, public increase their trust on banking sector and participate actively in banking system. 2019/1/17 National Bank of Cambodia