Cambodia: National Bank Confirms Riel Requirements for Loans

Oct 2017
Cambodia, October, 03 2017 - The National Bank of Cambodia (NBC), the country’s central banking authority, confirmed yesterday that it will make no changes to recently-issued requirements pertaining to the proportion of loans in the local currency that banking institutions need to exhibit in their loan portfolios.

NBC’s Director General Chea Serey, speaking during a meeting with representatives of the banking industry yesterday, said the banking authority will enforce the requirements as originally conceived, without any delays or substantial changes.

Last December, the NBC released a prakas, or directive, instructing commercial banks and microfinance institutions (MFIs) to issue a greater percentage of their loans in the local currency, a regulation that aims to promote the use of the riel, Cambodia’s national currency.

According to the directive, all financial institutions must have at least 10 percent of their loan portfolio in riel.

The prakas will come into effect at the end of 2019.

Ms Serey’s comments follow concerns raised by members of the banking community regarding the feasibility of complying with the directive.

“The deadline to comply will not be delayed, and the percentage that must be in the local currency will not be reduced,” Ms Serey asserted.

Ms Serey also said the NBC has recently asked all banks to share plans on how they intend to reach the 10 percent target.

The NBC’s director assured representatives of the banking sector that there is enough time for all financial institutions to implement the directive. She noted, however, that small and medium-sized banks and MFIs may require special attention and assistance to reach the target.

Speaking at the meeting yesterday, Lim Loong Seng, the managing director of RHB Indochina Bank Limited in Cambodia, said that some commercial banks will struggle to comply with the requirement.

“We have two more years to meet the deadline, but a lot of issues need to be addressed. I believe there should be more discussion on the issue,” he said.

Mr Loong Seng said the timeframe or the percentage required should be reconsidered.

Rath Yumeng, the group chief treasury officer at Acleda Bank, said the new requirements will be hard to meet for some commercial banks, as many of them do not have the necessary reserves of riel.

“Acleda Bank will try its best to reach the target. We are now at 6 or 7 percent,” Mr Yumeng said.

Hout Ieng Tong, president of the Cambodia Microfinance Association (CMA) and CEO of Hattha Kasekar Limited, said that MFIs will not face as many difficulties to comply with the legislation.

“I have checked with the top 10 MFIs and they haven’t notify me of any issues. Most of them already have 6 to 7 percent of their loan portfolios in the local currency, and will reach the 10 percent target as planned. Now more and more customers are borrowing in the local currency,” Mr Ieng Tong said.

He said CMA has been encouraging customers to borrow money in riel.

Ms Serey said that branches of foreign banks could find difficulties in meeting the requirements, and suggested they cooperate with MFIs, as demand for local currency is much higher in rural areas of the country where MFIs have a bigger presence.

“I would suggest that the Association of Banks in Cambodia helps those banks that are facing difficulties in adhering to the regulation,” Ms Serey added.

Source : Khmer Times

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