REGULATION DATED OCTOBER 25, 1996
THE LICENSING OF BANKS INCORPORATED UNDER LOCAL LAW
National Bank of Cambodia
Thor 796- 153 Bis, Pro, Kor
The Governor of the National Bank of Cambodia
Pursuant to the proposals by the Bank Supervision Department and the Cabinet of the National Bank of Cambodia.
That as the regulatory authority of the banking system and by virtue of its powers to issue regulations, the National Bank of Cambodia hereby sets the following conditions for compliance by commercial firms incorporated under local law, for submission to the National Bank of Cambodia the application for bank license to conduct banking activity or renewal of bank license which was issued for a limited period.
Regardless of the duration granted, this license can always be revoked. The conditions of issuance or renewal of bank license concerning foreign branch will be set in a separate Prakas and forwarded to the concerned banks at a later date.
Any applying banks shall be informed that no license shall be issued for any period of time if the conditions noted in the following articles are not fully complied with.
The existing banks license of which have a predetermined duration, in order to apply for the renewal of their license, shall comply with all conditions for licensing, particularly in regards to the composition and responsibilities of shareholders, as from this day or no later than the date of the submission of the renewal of their license.
Banking operations comprise the following activities:
1- The granting for profit of all types of credits to the public.
2- The acceptance of unallocated deposits from the public.
3- The provision of payment services to customers and the processing of means of payment in local or foreign currencies.
Any entity that practices any one of the three categories of operation as mentioned above shall be considered to be conducting the banking business and thus shall have to comply with bank licensing conditions.
Any bank can undertake directly or indirectly (via subsidiaries) for its own account or on behalf of its customers most of financial activities such as securities and gold or precious metal operations except insurance.
For the reasons of impact on the creation of money and of the risk imposed on depositors or creditors, the banking activities shall only be conducted by entities especially licensed by the National Bank of Cambodia, the authority of the banking system and formed either as companies incorporated under the local law or as branches of foreign banks.
The written provisional (temporary) approval is given with conditions to the applicant by the National Bank of Cambodia after studying the main objectives of the project and the composition of capital.
The formal license shall be issued only after all conditions are fully complied with including the payment for information on the documents applying for license and application fee.
The license shall be issued either for an indefinite duration or for a limited duration. If the license was issued for a limited duration, then the request for renewal shall be submitted to the National Bank of Cambodia no later than six (6) months prior to the expiration date of the said license.
CONDITIONS AND FORMALITIES REQUIRED
CONCERNING THE SHAREHOLDERS FOR COMPANIES INCORPORATED LOCALLY
AND THE CONSISTENCY OF THE DOCUMENTS TO APPLY FOR LICENSE
The name list of shareholders whose shareholding is not less than five per cent (5%) shall be submitted to the National Bank of Cambodia
Beneath this threshold, the National Bank of Cambodia assumes that these shareholders seek to invest for their saving and not to be involved in the management of the bank. From that level up the regulatory authority may collect all information pertaining to the financial situation of the shareholders.
Each shareholder on the list shall make a written declaration that the contribution of capital is on his own account.
In the case that a shareholder of the forming banks or existing banks is a company the following conditions shall be complied with:
1- The application shall attach the name list of major shareholders if the capital contribution equals or exceeds five (5) percent of the capital of the forming bank or the existing bank.
2- The Head Office of the company which is the shareholder shall be situated in a financially regulated location and recognized as such by the National Bank of Cambodia.
3- Shareholders which formed under chain of shareholding companies shall not be permitted, except in the case that it has been thoughtfulness and shall be authorized specifically by the National Bank of Cambodia.
The composition of the shareholders of the forming or existing banks shall be compulsory to have as follows:
The National Bank of Cambodia shall automatically consider any shareholder to be influential if his / her shareholding directly or indirectly at least equals to 20 per cent of the capital or the voting rights.
Any shareholder who has majority or influential shareholding shall be in a conditional financial situation which allow him / her with other influential shareholders, spontaneously or upon instruction from the regulatory authority, to improve the financial situation of the bank as soon as it appears weak.
In the case the bank faces solvency problems and in order to protect the clientele’s deposits, the regulatory authority shall request to the majority or influential share holders who are directly or indirectly responsible for managing the bank to take remedial measures to comply with all the prudential regulations concerning solvency, notably:
1- The level of minimum capital and its permanent counterpart, in real value, on the asset side in order that after deduction of invaluable assets, this real assets be permanently higher than the liabilities to the third parties by the amount at least equal to the minimum capital requirement.
2- and the Risk Cover Ratio as mentioned in the Regulation No.795-03, dated May 22, 1995 and Circular No.795-03 dated May 27, 1995.
In practice provided the risk can not be reduced, any shareholder with, majority or influential shareholding shall be under the obligation to inject additional own funds or other permanent funds such as subordinated loans in order to avoid the threat of bankruptcy, otherwise the National Bank of Cambodia shall place the bank under (temporary) administrative receivership according to Article 22 of the above mentioned Anukret.
A shareholder with majority or influential shareholding shall acknowledge in writing that he has understood completely his / her obligations as shareholder with majority or influential shareholding, including local banks which are subsidiaries of banks with overseas head office.
The financial standing of every shareholder with majority or influential shareholding shall be evaluated by the National Bank of Cambodia in according with the following conditions:
1- an individual (shareholder) will have to provide evidence in particular in providing data from bans and tax records showing the level and stability of revenues, personal wealth (fortune) notably fixed assets, and his / her business status;
2- a company shall show the evidence of its financial standing by providing its audited balance sheet and profit and loss account for the last three (3) financial years with related data generated by banks and tax records;
3- the shareholder with majority or influential shareholding of a shareholder company shall also show evidence about his / her financial standing in the same way.
It is drawn to the attention of majority or influential shareholders that they are responsible for having the other provisions of the solvency regulation complied with that is to, say:
1- The large exposures regulation in conformity with Articles 14 and 18 of Anukret No. 29 ANK. dated November 16, 1992;
2- The limitation of equity participation in conformity with Article 16 of Anukret No. 29 ANK. dated November 16, 1992;
3- and, in the calculation of the net worth the deduction of all kinds of credits granted to related parties in accordance with the Regulation No. Thor 795-03 date 22 May, 1995 and Circular No. Thor 795-03 dated 27 May, 1995.
In the computation of the ratios mentioned in point 1 and 2 of this Article the National Bank of Cambodia may also take into consideration, on motivated application for dispensation, the net worth of the Head Office if the local bank is a subsidiary of a bank Head Office of which is in Cambodia or overseas. The conditions the decision of the National Bank of Cambodia to give a dispensation is subjected to, shall be highlighted in the National Bank of Cambodia response to the application submitted with motives.
The minimum capital, level of which is revisable, is fixed at 10,000 million Riels according to Article 3 of the Anukret No.29 ANK, dated 16 November, 1992 on the Supervision of Commercial Bank.
The minimum capital shall be declared in national currency and shall fully paid up (100%) into the special account opened for the forming banks prior to the issuance of license.
If the shareholders’ subscriptions are made in foreign currencies the National Bank of Cambodia may require them to sell them beforehand against the Riels (to the NBC).
The funds transferred will be put at the new bank’s disposal to cover its expenses for the opening or equipment, to provide credits to resident enterprises or for any other use in the banking business that has no risk. Only the five (5) per cent guarantee on capital shall be blocked by the National Bank of Cambodia.
DOCUMENTS OF THE PROJECT
Besides the main elements of the document mentioned in the above Article 10,12, 13, 18 and 19 , the information or supporting documents mentioned below, if not yet provided, shall be obliged to be submitted along with the application for the new license or with the renewal license:
1- Documents evidencing the creation of the company in the process of becoming a bank or the pre-existent company.
2- Certified accounting records evidencing the activities and financial situation of the pre-existent company in the process of becoming a bank.
3- Memorandum and articles of association or modification to the memorandum and articles of association specifying notably the legal form of company chosen and the list of names related to the repartition of the capital and the voting rights.
4- The name list of managers and directors with their curriculum vitae. References on their moral standing and competence shall be justified and unquestionable.
5- Evidence justifying the readiness of the team to manage the banking operations such as the staff employment contracts.
6- Description of the main plan activities and of the economic benefit to Cambodia.
7- Pro forma financial standing of the next three financial years to include:
8- Description of network of correspondent banks abroad with copies of their written approval.
9- The estimated evolution of the number of employees by categories (managers, officers, employees) and estimated annual expenses (consistent with the projection of the profit and loss account).
10- Description of means planned to purchase:
11- Description of the organization chart and the method of controlling bank: internal and external supervision (auditors and, if it is the case, supervision by the group).
12- Indication of the official opening date for the bank.
All information in the above mentioned Articles shall be justified in writing, in numeric and signed in order to provide that they are consistent.
The bank in the process of formation and the existing bank which constitutes a company incorporated under local law shall contact Bank Supervision at an appropriate time in order to provide proper document for the license or for the license renewal.
All licensed banks shall inform in advance the regulatory authority of any amendments to the composition of shareholders or the management of bank which would influence on the conditions examined by the National Bank of Cambodia when issuing the license.
The Cabinet, Bank Supervision, all concerned departments, and all commercial banks under the supervision of the National Bank of Cambodia shall strictly implement this Prakas.
This Prakas shall be effective from the date of signing.
Phnom Penh, 25 October, 1996
Signed: Thor Peng Leath
Sealed: National Bank of Cambodia