In an effort to tighten and strengthen the banking sector and to lower the inflation, the National Bank of Cambodia (NBC) has tripled the minimum capital requirement for commercial banks in Cambodia. According to the NBC’s Prakas on new capital requirement and criteria for licensing approval on September 19, 2008, commercial bank reserves were raised from 50 billion riel (US$13 million) to 150 billion riel (US$36.5 million), and specialized bank reserves from 10 billion riel (US$2.5 million) to 30 billion riel (US$7.5 million).
Prakas read that banks, which obtained license or principal letter before this Prakas is issued, shall increase their capital to the minimum capital no later than the end of 2010.
Following the onset of the global financial crisis, the NBC raised minimum requirement. Its tightening measures also included stricter rules on lending to the property sector.
The tripling is an obstacle for small and newly-opened banks entering Cambodian market but it helps large banks become bigger.
It was because of the increase in the minimum capital requirement and less than a hundred customers, the Singaporean commercial bank VIP announced it would be shutting its operation in Phnom Penh after it opened in August 2008 and closed in December 2008.
National Bank of Cambodia (NBC) was recreated on October 10, 1980, as the central bank of the country. The NBC plays two main important roles in the context by acting as a monetary authority and as a supervisory authority over the commercial banks in Cambodia.
According to the NBC’s official figures, Cambodia has 25 commercial banks, six specialized banks and 17 microfinance institutions.
Tal Nai Im, NBC’s director general, said that the new commercial banks requirements are aimed at making it more difficult for prospective banks to enter the sector in Cambodia. Adding that “some banks that don’t have the minimum might have to withdraw”
The increase in the bank reserves does not affect the four main banks – Acleda, ANZ Royal, Canadia and the Cambodian Public Bank.
“I think that the tripling can help Cambodia’s economy in the future. It will not kill the small banks,” In Channy, CEO of Acleda bank, quoted by the Phnom Penh Post.