Kingdom of Cambodia
The National Bank of Cambodia
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With reference
to the Constitution of the Kingdom of Cambodia;
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With reference
to the Kram NS/RKM/0196/27 of January 26, 1996promulgating the Law on the
Organization and Functioning of the National Bank of Cambodia;
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With reference
to the Kram NS/KRM/1199/13 of November 18, 1999 promulgating the Law on Banking
and Financial Institutions;
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With reference
to the Kret CS/RKT/0398/85 of March 10, 1998 on the appointment of His
Excellency Chea Chanto as Governor General of the National Bank of Cambodia;
Pursuant to the
request of the Banking Supervision Department;
Decides as follows:
Article 1:
Banks shall at all times observe a solvency ratio in
accordance with the provisions of this Prakas. This solvency ratio of their net
worth to their aggregate credit risk exposure shall not be less than 20
percent.
Article 2:
The numerator of the ratio shall be the net worth calculated in accordance with the provisions of the Prakas on the calculation of the bank's net worth.
Article 3:
3-1.
The
denominator of the ratio shall comprise the aggregate of the assets (net amount
after deduction of provision and depreciation) and off-balance sheet items,
weighted to their degree of credit risk. It excludes the items which are
deducted in calculating the net worth according to the provisions of the Prakas
on the calculation of the bank's net worth.
3-2.
The
following weightings shall apply to assets:
3-2-1.zero weighting:
- cash,
- gold,
- claims
on NBC,
- assets
collateralized by deposits lodged with the bank,
- claims on sovereigns rated AAA to
AA-under the methodology used by Standard and Poor's Corporation.
3-2-2. 20 percent weighting:
- claims
on sovereigns rated A + to a-under the methodology used by Standard and Poor's
Corporation,
- claims
on banks rated AAA to AA-under the methodology used by standard and Poor's
Corporation.
3-2-3. 50 percent weighting:
-
claims on sovereigns rated BBB +
to BBB-under the methodology used by Standard and Poor's Corporation,
- claims
on banks rated A + to A-under the methodology used by Standard and Poor's
Corporation.
3-2-4. 100
percent weighting
-
all other
assets.
3-3.
The
following provisions shall apply to off-balance sheet items:
3-3-1.
Off-balance sheet items shall be classified in four categories in accordance
with the list given in Annex I. These items shall be taken into account:
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at their
value where they are classified as carrying a full risk,
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at 50
percent of their value where they are classified as carrying medium risk,
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at 20
percent of their value where they are classified as carrying moderate risk.
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Items
classified as carrying low risk shall not be taken into account.
3-3-2. The amounts thus determined shall
be multiplied by the weightings laid down in Paragraph 3-2 that are applicable
to the category to which the beneficiary or asset concerned belongs. However:
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In the case
of commitments covered by a guarantee provided by a third party, the weightings
shall be those applicable to the guarantor or the guarantee,
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In the case
of guarantees given to another bank in connection with the repayment of claims
held by the latter, the weighting shall be those applicable to these claims.
Article 4:
Banks must declare their solvency ratio as at 30 June and 31
December of each year. The National Bank of Cambodia may, in addition, ask any
bank to calculate its solvency ration on other dates specified by the NBC in
the light of the requirement of supervision.
The NBC shall determine by circular the format in which the
items for calculating the ratio must be declared.
The characteristics of the items to which the weightings
laid down in Article 3 are applied shall be specified, as necessary, by the
NBC.
The NBC may object to a given weighing being applied to an
asset or off-balance sheet item if it considers that item does not satisfactory
meet the condition in force.
Article 5:
The NBC reminds that weak or inadequate accounting polices
undermine the usefulness of capital requirement by causing overstated or
unreliable solvency ratios. Therefore the NBC attaches great importance to
implementation of sound accounting and valuation practices and especially to
the accurate classification and provisioning of assets in accordance with
provisions of Prakas on the classification and the provisioning of bad and
doubtful debts, including interests in suspense.
Article 6:
All provisions, which are contrary to those of this Prakas, are hereby repealed.
Article 7:
The General Direction, the General Secretariat, the General Inspection, the General Cashier and all Department of the National Bank of Cambodia, and all Banking and Financial Institutions under the NBC's supervisory authority shall strictly implement this Prakas.
Article 8:
This Prakas shall have effect from the signing date.
Phnom Penh, February 09, 2000
The Governor : Chea Chanto
CLASSIFICATION OF OFF-BALANCE SHEET
ITEMS
REFERRED TO IN PARAGRAPH 3-3-1
Banks have to note that items are not referred to in the
following list; they must classify them in the category of transactions that
show similar characteristics, after they have asked the NBC, if necessary.
1. Items classified as carrying a full risk:
- Loan guarantees (deductible from the risk exposure in respect of the beneficiary).
- Acceptances.
- Endorsements on bills not bearing the name of another bank or financial institution.
- Transactions with recourse.
- Irrevocable credit lines, or guarantees,
having the character of credit substitutes.
- Other items carrying a high risk.
2. Items classified as carrying a medium risk:
- Commitments to pay resulting from documentary
credits, issued or confirmed, where the underlying goods do not serve as
collateral.
- Warranties and indemnity bonds (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes.
- Indrawn facilities, particularly overdrafts and commitments to lend with an initial term of more than one year.
- Other items carrying medium risk.
3. Items classified as carrying a moderate risk:
- Documentary credits issued or confirmed, where the underlying goods serve as collateral and other similar transactions.
- Other items carrying a moderate risk.
4. Items classified as carrying a low risk:
- Indrawn facilities, particularly overdrafts and commitments to lend, which are for an initial maturity of up to and including one year or that, may be cancelled unconditionally at any time without notice.
- Other items carrying a low risk.