REGULATION DATED DECEMBER 29, 1997
ON THE CONDITIONS FOR BANKS AND FINANCIAL INSTITUTIONS
National Bank of Cambodia
The Governor of the National Bank of Cambodia
Having seen the constitution of the Kingdom of Cambodia.
Having seen the necessity to enhance the supervision of banks and financial institutions.
Pursuant to the request by Bank Supervision Department and Cabinet of the National Bank of Cambodia.
to set the following conditions for banks and financial institutions, hereby called "Institution " which are under the supervision of the National Bank of Cambodia:
Article 1 :
The capital of institutions is defined as follows:
1. 1. For the institutions which commenced operation before 1997, but has not yet paid up 100 % of registered capital: they are required to prepare a pay off plan for the outstanding amount in four quarterly installments before the end of 1998 to their accounts with the National Bank of Cambodia. In case of failure to pay-off by the due date, the institution concerned shall be penalized by paying interest to the NBC at 0.1 % per day of the capital which has not been paid in each quarter for the period of twelve months. If unable to make payment within that 12 months, the institution shall be faced with severe measures.
1.2. For the institutions which have been operated in 1997: the institutions shall have registered capital of at least 50,000,000,000 (fifty billion) Riels, except special case when the National Bank of Cambodia grants dispensation in accordance with the characteristics of the institution.
1.3. The institutions shall pay up 100% of their registered capital before the commencement date of operations through their accounts opened at the National Bank of Cambodia.
1.4. The institutions shall permanently maintain their net worth at least equal to paid -up capital mentioned in the above paragraphs 1.1, 1.2 and 1.3.
When the capital decreased below the said amount, the concerned institution shall fill up in a period of time as defined by the National Bank of Cambodia. In case of a failure to pay up the deficient amount, the institution shall be subject to a fine, charging an interest rate on the deficient amount at a refinancing rate until all payments are brought up to date.
1.5. In accordance with paragraph 1.4, the Net Worth of the institution shall be computed by the formula below:
NET WORTH = Paid -Up Capital + Reserves + General provision +_ Profit/loss - Loans to shareholders, Board of Directors and Managers
Article 2 :
2.1. Each institution shall deposit a capital guarantee in the account opened at the a National Bank of Cambodia, for an amount of 5% of its registered capital with non interest bearing and another 5% with an interest rate of SIBOR (Singapore Interbank Offered Rates) -1/4 (minus one/fourth of SIBOR).
2.2. The total ten percent (10%) capital guarantee shall not be withdrawn by the institution until liquidation.
Article 3 :
The registered capital of the institution can be increased or decreased on the following conditions:
3. 1. The institution shall submit an application to the National Bank of Cambodia for studying and approval at least three months prior to change.
3.2 In case of increasing capital ;
- The institution shall pay a fee of 0.10% (zero point one percent ) on increased amount.
3.3. In the case of decreasing capital :
3.3. 1. The institution shall pay a fee of 1.00% (one percent ) on decreased amount.
3.3.2. The institution shall maintain the minimum capital not less than 50,000,000,0,00 (fifty billion) Riels as stated in
Article 4 :
The shares of the institutions shall be sold or transferred under the following conditions :
4. 1. The institution shall submit an application to the National Bank of Cambodia for study and approval at least three months prior to change.
4.2. The institution shall pay a fee of 1% (one percent) of the total value of shares to be sold or transferred .
4.3. New shareholder shall increase its capital twice the value of shares obtained (that is to say that the new shareholder has to pay a double amount for the shares obtained) .
4.4. The institution shall apply for an amendment to its Articles and Memorandum of Association to the National Bank of Cambodia for study and endorsement and the institution is required to pay a fee in according with Article 5 thereunder .
Article 5 :
The Articles and Memorandum of institution can be amended according to the following conditions:
5.1. The institution shall submit an application to the National Bank of Cambodia for study and approval in advance.
5.2. The institution shall pay a fee of 1,000,000 Riels (one million Riels) per amended page.
Article 6 :
The procedures for applying operating licenses of the institutions shall conform toRegulation Thor 796- 153 Bis, Pro, Kor, dated October 25, 1996. The founder of the institution shall be applied in three stages :
6. 1. First stage : Providing information and guidelines on conditions for the application:
The establisher of an institution shall pay a fee of 700,000 (Seven hundred thousand )Riels to the National Bank of Cambodia for information and conditions on the application. When an application is filed he/she shall pay another fee of 3,000,000 (three million) Riels for a processing fee.
6.2. Second stage : Issuing of principal approval
6.2.1. The principal approval is issued by the National Bank of Cambodia after studying the documents and found to be correct and complete, to enable the transfer of capital to National Bank of Cambodia for setting up a bank premises and preparing for the commencement of operations as defined in the conditions stated in the principle approval.
6.2.2. In case that the institution cannot be in operation at the assigned date as in the principle approval, it shall be fine 5,000,000 Riels (five million Riels) per day for a period of 30 days. If still unable to operate, the principle license shall be repealed.
6.3. Third stage: Issuing an Operating License
6.3.1. This operating license is issued to individual institution by the National Bank of Cambodia after examining that all conditions in the principle approval and required documents are fully complied with.
6.3.2. The Operating license (also includes the license for the branch of the institution) is valid for a period of 3 years, from the issued date.
6.3.3. Each institution shall apply for renewal of its operating license to the National Bank at least 6:months before expiration. Failure to do so shall be fined at 1,000,000 Riels (one million Riels) per day until such application is submitted.
6.3.4. The operating license can be renewed when the institution has fulfilled all formalities or any document that concerns the validity and legalization .
If the institution cannot conform to all these conditions, it shall be fined 1,000,000 Riels (one million Riels) per day effective from the last valid date of the relevant operating license until renewal date is granted.
7.1. Each of the following institutions shall pay a yearly fee for its operating license in an amount of 70,000,000 Riels (seventy million Riels) by January 15th, of each year :
7. 1. 1. The locally incorporated institutions, its branches or representative offices in or outside Cambodia, and
7.1.2. Branches or representative offices of foreign institutions residing in Cambodia.
7.2. If an institution is created within the year, it shall pay a license fee from the beginning of the quarter in which the bank is established.
7.3. In case of late payment, the institution shall be penalized to pay an interest rate defined by the official refinancing rate for a period of 30 days. If still unable to make payment, it shall be subject to serious penalty .
CREDIT AND PARTICIPATION OPERATION
Article 8 :
The institution shall abide by the regulation of the National Bank of Cambodia on risk allocation by enforcing the following regulations:
8.1. The institution is not allowed to grant credit (including leasing and all kinds of commitments) to an individual customer exceeding 20% (twenty percent) of its net worth, except by prior authorization by the National Bank of Cambodia under special circumstance.
In the case of violation, the institution shall be liable for a fine on the violated amount equal to related earning (including interest rate, procedure fee and other fees) received or to be received over the term of the credit to the National Bank of Cambodia. In case of serious violation, the institution shall be sued according to the existing law.
8.2. The institution is not allowed to grant credit (including leasing and all kind of commitments) to:
8.2. 1. Its own shareholders, members of Board of Directors and managers .
In case of violation, this credit shall be deducted from the computing of net worth as mentioned in Article
8.2.2. Individuals who participate in the setting up of the institutions.
8.2.3. Individuals who operate outside Cambodia, and,
8.2.4. Individuals who operate locally but the collateral is located outside Cambodia.
In case of violation, the National Bank of Cambodia shall force the individual institution to collect the credit before its maturity and to pay a penalty for an amount equal to the income (interest rate-fee and other fees) received or to be received from that credit until its maturity
8.3. The institution cannot operate the type of banking intermediary by using the short-term funds that are demand deposits of customers, to finance long term credit.
In case of violation, the institution shall be forced to collect that credit before its maturity and shall pay a penalty on that credit to National Bank of Cambodia using the existing refinancing rate over the credit term until it is collected.
8.4. The institution is not allowed to participate with another institution or any company over 15% (fifteen percent) of its net worth, and total amount of participation shall not exceed 60% (sixty percent) of this net worth.
In case of violation, the institution shall be penalized to pay an interest rate to the National Bank of Cambodia on the exceeded amount using the refinancing rate from the date of participation until the settlement date.
Article 9 :
Each institution shall strictly carry out the following conditions for its fixed assets:
9.1. The institution is not allowed to acquire the fixed assets (land premises, and all kinds of buildings) except with approval from the National Bank of Cambodia for use as its head office, branches, representative offices , accommodation for management and employees and warehouse that can be used to store all kinds of customers collateral.
9.2. The ownership of properties for serving the need as mentioned in Article 9.1 shall be in the form of a purchase or lease conforming to the principle of law and according to the nationality of the institution.
The total value of fixed assets held by the institution, in whatever form, shall not exceed 30% (thirty percent) of its net worth, except when it is specially approved by the National Bank of Cambodia according to the characteristics of the institution.
In case of non-compliance, the subject institution shall increase its capital to maintain a percentage of 30% of the net worth. Otherwise, the institution shall be liable for the penalty of an interest rate on the violated amount to the National Bank of Cambodia using the existing refinancing interest rate, from the record date to the settlement date.
9.3. The institution shall apply for a title of ownership or leasing according to the nationality of the institution .
9.4. No physical person, who is in or outside the institution and who has Cambodian nationality is allowed to own the property on behalf of the institution. In case of violation, the institution shall bear the appropriate administrative measure of the National Bank of Cambodia according to its violation . If the violation is serious, the institution shall be sued in a court of law.
Article 10 :
The institution shall dispose by selling or auctioning off the confiscated properties of debtors in a period of less than twelve months from the confiscated date. Otherwise it shall be liable for a penalty of an interest rate on the remaining value of the confiscated property using the refinancing rate of the National Bank of Cambodia until the date of disposition of those properties.
Article 11 :
All provisions or regulations contrary to this Prakas, especiallyRegulation Thor 794 - 001 Bor, Bor, 3 dated 01-01-1994 regarding the conditions on Commercial Bank shall hereby be repealed.
Article 12 :
General Directors, Internal Audit, Cabinet, all National Bank of Cambodia departments and all commercial banks and financial institutions under the supervision of the National Bank of Cambodia shall strictly implement this Regulation .
Article 13 :
This Prakas shall be effective from the date of signing .
Phnom Penh , December 29, 1997
Thor Peng Leath