Banking Sector in Cambodia

INFORMATIVE REPORT
ON
BANKING SECTOR
IN CAMBODIA
April, 2009
TABLE OF CONTENTS
CHAPTER I INTRODUCTION...................................................................................................................................... 4
1. ABOUT CAMBODIA .................................................................................................................................................... 4
1.A. GEOGRAPHY ....................................................................................................................................................... 4
1.B. ECONOMY .......................................................................................................................................................... 4
1.C. INTERNATIONAL RELATIONS ............................................................................................................................. 5
A- Relations with Neighbours ....................................................................................................................................................... 5
B- Relations with the International Community ........................................................................................................................... 6
1.D. TRADE AND INVESTMENT .............................................................................................................................. 6
A- External Trade and Capital Movement .................................................................................................................................... 6
B- International Investment Position............................................................................................................................................. 7
2. THE BANKING HISTORY IN CAMBODIA .................................................................................................................... 8
3. CURRENT BANKING SITUATION IN CAMBODIA .................................................................................................... 10
CHAPTER II:BANKING MARKET POTENTIAL AND CHALLENGE............................................................. 13
1. SERVICE PROVISION FROM MAJOR BANKS ............................................................................................................. 13
1.A. CANADIA BANK PLC ........................................................................................................................................ 13
1.B. ACLEDA BANK .................................................................................................................................................. 14
1.C. CAMBODIAN PUBLIC BANK ............................................................................................................................. 17
1.D. ANZ ROYAL ..................................................................................................................................................... 18
2. LOAN AND DEPOSIT IN BANKING .......................................................................................................................... 21
3. PROFITABILITY ......................................................................................................................................................... 22
4. CHALLENGE IN BANKING SECTOR ......................................................................................................................... 27
CHAPTER III: BANKING REGULATION AND LICENSING............................................................................ 30
1. CURRENT BANKING REGULATIONS ....................................................................................................................... 30
2. KEY CRITERIA TO GET LICENSE................................................................................................................................ 32
2.A. SPECIALIZED BANK .......................................................................................................................................... 32
A- PROCEDURE FOR SUBMITTING A LICENSE APPLICATION ......................................................................................................... 32
B- LICENSE APPROVAL AND RELATED FEES ................................................................................................................................. 34
C- PRUDENTIAL RULES ................................................................................................................................................................. 35
D- OTHER PROVISIONS ................................................................................................................................................................ 35
2.B. COMMERCIAL BANK.................................................................................................................................. 36
A- PROCEDURE FOR SUBMITTING A LICENSE APPLICATION ......................................................................................................... 36
B- LICENSE APPROVAL AND RELATED FEES ................................................................................................................................. 38
C- OTHER PROVISIONS ................................................................................................................................................................. 39
3. THE SUPERVISORY ROLE OF THE NATIONAL BANK OF CAMBODIA ..................................................................... 40
CHAPTER IV .................................................................................................................................................................... 42
CONCLUSION ................................................................................................................................................................. 42
REFERENCES: .................................................................................................................................................................. 43
Brothers Investment Group Co., Ltd. www.big.com.kh

Page 2 of 44
EXECUTIVE SUMMARY
Before the 90s, the banking sector in Cambodia was strongly affected by political events. For
instance, following the establishment of the National Bank of Cambodia in 1954, private and
state banks were allowed to operate together, but the economic neutrality policy of Sangkum
Reastr Neyum in 60s, national and foreign private banks were forced to close. After the military
coup in 1970, the banking system was again liberalized only to be completely destroyed when
the Khmer Rouge regime came to power in 1975 and closed down the banking system and blew
up the National Bank leaving the country without any functioning banks or currency.
When the country renounced the centrally planned economy in 1989 and advocated free market
economics, the banking system has been transformed from the mono-banking system to the 2-
tier banking system, and welcomed the first state-private joint venture bank in 1991.
During the 90s, the banking sector experienced ups and downs. Commercial banks increased in
number to 31 by the end of 1999, but reduced numbers to just 14 in 2002 due to the new paid up
capital requirement from US$5 million to US$13 million, which led to the closure of 12 banks in
2000 and another 5 in 2002.
The Banking sector again started to pick up during the strong economic growth and political
stability in the second half of this decade, in which in two years between 2007 and 2008, 10 new
banks were established. The arrival of international banks brought some innovative banking
practices - the branches, the ATMs, POS; raised the bar beyond the formal regulatory
framework; and pushed up the standards of smaller local and regional institutions.
Profitability has been strong, which contributes from three factors (i) Low labor cost; (ii) Lending
spreads are high at 4-5% for prime loans and 11-12% for small-business loans; and (iii) Low
Non-performing Loans
The Law on Banking and Financial Institutions divides banks into two categories, specialized
banks and commercial banks. The difference between these two types is the commercial banking
operation must include: (i) Credit operations for valuable consideration, including leasing,
guarantees and commitments under signature; (ii) The collection of non-earmarked deposits
from the public; (iii) The provision of means of payment to customers and the processing of said
means of payment in national currency or foreign exchange; while the specialized bank need to
perform only one of the above operation.
Cambodia’s banking sector, however, is still in its infancy with a huge growth potential, as
formal credit accessibility is just about 10 percent of the population, and per capita lending is
just around US$114, which is comparable to Thailand in the early 1970s, Indonesia and the
Philippines in the mid- to late-1980s and Vietnam in 2000.
The challenges ahead for the banking sector are improving profitability, rising non-performing
loans, reinforcing technology, risk management, sharpening skills, greater customer orientation,
corporate governance, and international standards.
The National Bank of Cambodia supervises the banking system and its related activities such as
the money market, the inter-bank settlement system, and financial intermediation.
In order to obtain the license from NBC, commercial banking application need to have a
minimum capital requirement of US$36.5 million (US$ 7.5million for specialized banking), and
other requirement as stipulated in law on banking and financial institutions (1999), PRAKAS No
B700-04 on licensing of commercial bank, PRAKAS No B700-05 on licensing of specialized bank
(2000), which is also summarized in Chapter III of this report.
Page 3 of 44
CHAPTER I
INTRODUCTION
1. ABOUT CAMBODIA
1.a. GEOGRAPHY
Cambodia, with an area of 181,035 sq km (69,898 sq miles), is bordered by Thailand, Laos and
Vietnam and has a coastline on the Gulf of
Thailand. Apart from the Cardamom Mountains
in the south-west and uplands in the north-east,
the country is predominantly flat. The sharp
slope of the Dangrek Mountains marks much of
the northern border with Thailand. In the centre
of the country is the largest lake in South East
Asia, the Tonle Sap. The capital, Phnom Penh, is
located at the confluence of the Mekong, Tonle
Sap and Bassac rivers. Beyond the river valleys
the land is frequently infertile, because rainfall is
scant and there is little irrigation. Most
Cambodians live in rural areas, cultivating rice as their staple crop.
1.b. ECONOMY
Cambodia remains largely agrarian with one in three Cambodians living below the poverty line.
Inequality has grown over the last decade, particularly during the years 1994-1997. The
government has made good progress in stabilising the economy and reducing poverty levels. In
2005 the government developed a comprehensive reform agenda set out in the National Strategic
Development Plan, which has solid support from foreign donors. Cambodia has seen impressive
growth rates at almost 10% since 2000. However, growth has been narrowly based (primarily in
Phnom Penh, Siem Reap and Sihanouk ville, and in the garment, construction and tourism
sectors) with modest linkages to the rest of the economy and this pattern has resulted in limited
benefits to the 84% of the population who live in rural areas.

Page 4 of 44
Cambodia is rich in natural resources such as mineral, forestry, and water. Oil and gas deposits
have been identified in the Cambodian territorial waters but quantities have not yet made public.
Table 1: Economic Indicators in Cambodia

2004 2005 2006 2007 2008-f1
1. GDP
GDP % change 10.00 13.40 10.80 9.60 7.00
Per capita GDP (In U.S dollar) 373.00 430.00 513.00 589.00 751.00
2. Inflation
Inflation(12 month) 3.87 5.78 4.71 5.84 21.50
3. Government Budget (In percent of
GDP)
Revenue 10.30 10.30 11.50 11.80 12.00
Expenditure 14.90 13.70 14.00 13.30 14.90
4. Money and Credit (12 month in%
Change)
M2 30.00 16.10 38.20 62.90 29.00
Total Deposit in the Banking system 25.90 15.60 44.80 75.00
Total Outstanding Loans in the 32.90 17.40 62.80 78.00
Banking System
Credit Private Sector 35.90 31.80 51.60 76.00 35.00
5. Balance of Payments
Exports 2,589.00 2,910.00 3,693.00 4,041.00 4,793.00
Imports - -3,928.00 -4,749.00 - -6,243.00
3,269.00 5,311.00
Trade Balance -681.00 -1,018.00 -1,057.00 - -1,450.00
1,270.00
Current Account (exclude official -436.00 -591.00 -525.00 -571.00 -795.00
transfer)
Exchange Rate (Riel per Dollar and 4,027.00 4,112.00 4,057.00 3,999.00 4,120.00
period)
6. Dimensions of the Banking System as at 30th September,2008
Number of banks(2) 25 Commercial Banks
6 Specialized Banks
17 Licensed Microfinance Institute
Total Assets (US$) 3,967.33 million
Total Loans Portfolio Banks(US$) 2,247.08 million
Total Deposit (US$) 2,253.08 million
1.c. INTERNATIONAL RELATIONS

A- Relations with Neighbours
Cambodia enjoys cordial bilateral relations with all its regional neighbours despite some border
problem with Thailand. Cambodia will continue to co-operate closely with neighbouring
Vietnam and Thailand, particularly on plans to define its land borders with these
countries. Since Cambodia joined the Association of South East Asian Nations (ASEAN) in 1999,
its foreign policy has been largely regionally-focused.
1
Economic Institute of Cambodia, Economics Today Magazine, Volume 2, Number 28, December 1-15, 2008
2 - National Bank of Cambodia, Banking Supervision Department Report
Page 5 of 44
B- Relations with the International Community
After reaching a settlement in the civil war in the early 1990s, the international community
particularly China, Japan, the US and the EU have invested heavily in the reconstruction of the
country, which was severely damaged by 20 years of civil war.
Currently Cambodia is a member of UN, member of ADB, member of World Bank, member of
IMF, member of ASEAN (1999), member of WTO (2003), and member of Asia Europe Meeting
(ASEM, 2004).
1.d. TRADE AND INVESTMENT
Cambodia has enjoyed relatively high economic growth, with an average GDP growth of 9
percent per annum for the last five years. Nonetheless, the country’s economy appears to remain
vulnerable, mainly due to its high dependence on just a few sectors and external influences. In
2007, garment exports alone reached 72% of Cambodia’s total exports, with almost all the
material needed for these garments being imported.
Figure 1: Cambodia’s Total Exports 2007 (in US$ mln.)

other Miscellaneous., Animal and
manufactured vegetable, Wood and
104.9
Goods, 0.6 553.6 products, 25.6
Rubber and
products, 156.8
Beverages and
tobacco, 44.3
Garment ,
2957.6
Source: National Bank of Cambodia, Cambodia Balance of Payment Statistic Bulletin, Series
N0.19 March Quarter 2008.
A- External Trade and Capital Movement

External trade has played a very important role in boosting the Cambodian economy during the
last decade. The annual amount of external trade for both export and import of goods keeps
increasing significantly, around 20 percent annually.
Table 2: Cambodia Balance of Payment, 2001-2005 (million of US$)
2001 2002 2003 2004 2005
Balance of Goods -523 -591 -581 -681 -1018
Balance of Services 177 229 115 291 471
Balance of Incomes -138 -184 -179 -221 -254
Current Transfers(net) 396 439 413 428 440
Current Account -88 -107 -232 -183 -360
Capital & Financial Accts 216 288 311 351 396
Overall Balance 128 181 78 169 35
Source: National Bank of Cambodia
Page 6 of 44
Table 3 Cambodia Balance of Payment (million of US$) from DQ06-MQ08n
300.0
200.0
100.0
0.0
-100.0
-200.0
-300.0
-400.0
-500.0
DQ06 MQ07 JQ07 SQ07 DQ07 MQ08
Balance on Goods -270.8 -217.6 -329.1 -412.2 -375.7 -277.9

Net Services 149.6 200.4 117.8 140.7 185.4 219.4
Net Incomes -77.3 -78.1 -80.4 -103.8 -97.7 -97.7
Net Current Transfer 123.5 136.1 136.0 135.9 136.0 140.4
Balance on Current Account -75.0 40.9 -155.7 -239.5 -152.0 -17.7
The decrease in current account deficit from US$152.0 million in December Quarter 2007 to US$
17.7 million in March Quarter 2008 was mainly due to a decrease of 26.0% in the balance of goods
deficit, while the net income deficit increased 2.1% compared to the previous quarter.
B- International Investment Position
At the end of March 2008, Cambodia’s net international investment position showed a net
foreign liability of US$1,213.3 million, down 3.1% compared to the net balance at the end of
December 2007, and up 18.6% compared to the net balance at the end of March 2007
Figure 2: International Investment Position Aggregates
1,500.0
1,000.0
500.0
0.0
-500.0 DQ06 MQ07 JQ07 SQ07 DQ07 MQ08
-1,000.0
-1,500.0
-2,000.0
-2,500.0
-3,000.0
Net Equity Net Debt Net Other Instruments Net International Investment Position

Page 7 of 44
Net equity liabilities, at the same time, increased from US$2,776.2 million (up 8.4%). Net debt
increased from US$972.5 million to US$1,190.7 million (up 22.4%) and net other instruments
increased from US$336.5 million to US$372.2 million (up 10.6%)3.
2. THE BANKING HISTORY IN CAMBODIA

Following the independence from France and its establishment of National Bank in 1954,
Cambodia started printing its own national currency of Riel in order to completely terminate the
monetary alliance with the Vietnamese and Laos currency.
Soon after, there was local banking system in which the state banks and private banks operated
together in the territory of Cambodia.
In 1963, however, Cambodia's economy started to stagnate when the policy was designed to link
economic neutrality policy to the country's territorial integrity and border security.
In 1964, in order to follow the national building policy of the Sangkum Reastre Niyum, the
banking system had been gradually reformed to meet the national economy’s requirement by
transforming the National Bank of Cambodia from the semi-autonomous institution to the state-
owned bank under the form of the public entity with characteristics of industry and commerce,
while the national and foreign private banks were closed, and the state established some state-
owned banks such as Bank of Inadanajati, Development Bank, and the Rural Agricultural Bank.
Following the change of political regime, the state had liberalized the banking system once again
in late 1970. The private banks were authorized to operate along with the state bank under the
regulation and supervision of the National Bank of Cambodia.
During the regime of Khmer Rouge, the National Bank of Cambodia was demolished with
explosives by the new Khmer Rouge government as a symbol of their rejection of capitalism, the
banking system was totally destroyed, and the use of money was outlawed and the economy
crumbled.
The Vietnamese-backed government that topped the Khmer Rouge in 1979 re-established the
People's Bank of Cambodia called "Bank of Cambodia" as a Central Bank of the Country by sub-
decree No 1211 dated October 10, 1979 of the Council of the Revolutionary People of Cambodia.
Financial sector has to restart again, from the ground up, a development that still, in many ways,
a work-in-progress.
Since 1989, the banking system had been gradually reformed through transforming the 20-
provincial and municipal banks into specialized provincial and municipal banks and had been
operating with economic and financial autonomy in their territory, the People's Bank of
Kampuchea had played its role as monetary authority to direct and supervise these banks. In
1991, the first Commercial Bank (Cambodia Commercial Bank "CCB") was established under the
form of state Joint Venture Bank for attracting investors and serving the activity of the United
Nations Transitional Authorities in Cambodia (UNTAC).
The Paris Peace Accord on 23 October 1991 was a political detour of the transforming the
economic regime from planning economy to free market economy that made the Cambodia’s
banking system transformed from the mono-banking system to the 2-tier banking system.
Furthermore the state had completely authorized the banking activities to be operated in
Cambodia through establishing the commercial banks under the local laws or under the form of
foreign bank’s branches. Foreign banks are guaranteed right and obligations equal to local banks
and there are no restrictions on foreign ownership of banks.
In November 2000, however, a restructuring initiative by the National Bank led to the de-
licensing and liquidation of 12 banks (see in table 4) that failed to increase their paid-up capital
3- Cambodia Balance of Payment Statistics Bulletin, National Bank of Cambodia. March Quarter 2008
Page 8 of 44
from KHR 20 billion to a new minimum of KHR 50 billion. This, however, result in the whole
banking system stronger.
A new prakas4 in September 2008 further increased the minimum capital requirement to KHR
150 billion (One hundred and fifty billion Riel) for commercial bank, and KHR 30 billion (Thirty
billion Riel) for rural credit specialized bank as the government believed that unsafe banks could
lead to a systemic financial crisis, economic collapse and massive permanent economic losses, as
in the Asian financial crises in 1997-1998.
Table 4: Name of banks before the re-licensing program

Name of Banks Year of Start
1- Foreign Trade Bank 1979
2- First Commercial Bank 1991
3- Krung Thai Bank
4- Maybank
5- Cambodia Asia Bank 1993
6- Canadia Bank 1991
7- Cambodian Commercial Bank 1991
8- Cambodia Mekong Bank 1994
9- Cambodia Public Bank 1996
10- Union Commercial Bank
11- Vattanak Bank 2002
12- Rural Development Bank
13- Cambodia Agriculture, Industry and Commerce Bank
14- Singapore Bank Corporation 1993
15- Standard Chartered
16- Bangkok Bank
17- Thai Farmers Bank
18- Credit Agricole Indosuez Bank
19- Cambodia Agriculture-Commercial Bank
20- Phnom Penh City Bank
21- Chansavangwonk Bank Corporation
22- Singapore Commercial Bank
23- Rich Nation Bank
24- Great International Bank Ltd
25- Global Commercial Bank
26- Peace Commercial Bank
27- First Oversea Bank
28- Emperor International Bank
29- Cambodia Bank International
30- Angkor Bank
31- Cambodia Farmers Bank
4
National Bank of Cambodia, Prakas No.T7.08-193 Prokor On New Capital Requirement and Criteria for Licensing
Approval Of Banks, September 19,2008
Page 9 of 44
Table 5: Banks that failed to increase their paid-up capital after re-licensing
Dated of
Name of Banks Closed in 2000-20025
withdrawal
1- Bangkok Bank 08-Dec-00
2- Thai Farmers Bank 03-Jul-00
3- Cam. Agriculture-Commercial Bank (Compulsory liquidated) 08-Dec-00
4- Phnom Penh City Bank 08-Dec-00
5- Chansavangwonk Bank Corporation 31-Jul-00
6- Rich Nation Bank (Compulsory liquidated) 08-Dec-00
7- Great International Bank 08-Dec-00
8- Global Commercial Bank 08-Dec-00
9- Peace Commercial Bank  08-Dec-00
10- Cambodia Bank International 31-Jul-00
11- Angkor Bank 31-Jul-00
12- Cambodia Farmers Bank (Compulsory liquidated) 31-Jul-00
13- Singapore Commercial Bank 19-Mar-02
14- First Oversea Bank (Compulsory liquidated) 19-Mar-02
15- Emperor International Bank 04-Apr-02
16- Standard Chartered Bank downgrade to representative office 01-May-02
17- Credit Agricole Indosuez Bank 18-Sep-02

Banks that failed to increase their paid-up capital and voluntary close
3. CURRENT BANKING SITUATION IN CAMBODIA

Since the closure of banks that failed to increase the minimum Capital, public confidence in the
banking system has been recovering.
Banking system in Cambodia has made substantial progress both in the scope and scale of its
activities. The bank sector plays a core role in national economic development activities. In 2007,
through banking intermediation, investors mobilized around US$700 million in additional
domestic capital, compared to US $300 million in 2006, which greatly contributed to Cambodia’s
economic development. In terms of scope, over the last two years, we have seen ten newly
opened commercial banks and two more specialized banks invested in the Cambodian market, in
particular the entry of ANZ Royal bank as well as those of Japanese and Korean investors.
Figure 3 : Deposit and Loan from banks

USD M
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008e
Deposit $382 $455 $569 $656 $826 $954 $1,400 $2,250 $3,068
Loan $310 $238 $269 $336 $451 $582 $893 $1,592 $2,539
Source: ANZ Royal Bank, Banking sector in Cambodia, 2008
5 - National Bank of Cambodia, Annual Report 2007

Page 10 of 44
However, despite steady growth and a more stable regulatory framework, Cambodia’s banking
and financial sector remains a small part of an overwhelmingly cash-based economy, with bank
deposits constituting just 18 percent of GDP in 2007, and even then concentrated mostly in the
capital and larger provincial towns.
The arrival of large, consumer-oriented banks such as ANZ Royal, which brought some
innovative banking practices - the branches, the ATMs, has raised the bar beyond the formal
regulatory framework and pushed up the standards of smaller local and regional institutions
As of November 2008, the banking system in Cambodia under the National Bank of Cambodia’s
supervisory authority, in total 25 commercial banks, six specialized banks, 17 licensed
microfinance institutions, 26 registered NGOs and over 60 unregistered NGOs(6).
Table 6: Banks in operation as of November 2008

Banks HQ & Branches
Commercial Bank
1 Advanced Bank of Asia Limited Phnom Penh(2), Siem Reap (1)
Phnom Penh(11), Siem Reap(1), Sihanouk Ville(1), Pailin(1)

Kampot-Kep(1), Kampong Cham(1), Banteaymeanchey(1),
Battambang(1), Takeo(1), Pursat(1), Kampong Thom(1),
2 ACLEDA Bank Plc.
Kampong Speu(1), Kampong Chhnang(1), Svay Rieng(1), Prey
Veng(1), Rattanakiri(1), Kandal(1), Otdar Meanchey(1), Kratie(1),
Koh Kong(1), Preah Vihear(1), Mondulkiri(1), Stung Treng(1)
Phnom Penh(9), Siem Reap(1), Sihanouk Ville(1), Battambang(1),

3 ANZ Royal Bank
Poipet(1), Kampong Cham(1),
4 Cambodia Asia Bank Ltd. Pnhom Penh(1)
Phnom Penh(9), Sihanouk Ville(1), Battambang(1), Kampong
5 CANADIA Bank Plc. Cham(1), Pailin(1), Siem Reap(1), Poipet(1), Kampot(1), Banteay
Mean Chey(1), Kandal(1), Kompong Chhnag(1), Prey Veng(1),
6 Cambodian Commercial Bank Phnom Penh(1), Siem Reap(1), Sihanouk Ville(1), Battambang(1)
Cambodian Mekong Bank Public
7 Phnom Penh(4), Siem Reap(1), Sihanouk(1),
Limited
Phnom Penh (6),Siem Reap(1),Sihanouk Ville(1), Battambang(1),
8 Cambodian Public Bank
Kandal(1), Kampong Cham (1), Poi Pet (1)
9 Camko Bank Phnom Penh(1)
10 First Commercial Bank Pnhom Penh(1)
11 Foreign Trade Bank of Cambodia Phnom Penh(1)
12 Krung Thai Bank Phnom Penh(1), Siem Reap(1)
13 May Bank Phnom Penh(2)
14 Maruhan Japan Bank Plc. Phnom Penh(1)
15 Prosperity Investment Bank Plc. Phnom Penh(1)
Singapore Banking Corporation
16 Phnom penh(2), Sihanouk(1), Siem Reap(1)
Ltd.
17 Sinhan Khmer Bank Phnom penh(1)
18 Union Commercial Bank Plc. Phnom Penh(1), Sihanouk Ville(1), Siem reap(1)
19 Vattanak Bank Phnom Penh(1), Siem Reap(1)
20 VIP Bank Phnom Penh(1)
21 Khmer Union Bank Phnom Penh(1)
6 - National Bank of Cambodia, Banking Supervision Department Report 30, September 2008.
Page 11 of 44
22 Buyoong Khmer Bank Phnom Penh(1)
23 Phnom Penh Commercial Bank Phnom Penh(1)
24 OSK Indochina Bank Phnom Penh(1)
25 Angkor Capital Bank Phnom Penh(1)
SPECIALIZED BANKS
1 ANCO Specialized Bank Phnom Penh(1)
Cambodian Development
2 Phnom Penh(1)
Specialized Bank Ltd.
3 First Investment Specialized Bank Phnom Penh(1)
4
Rural Development Phnom Penh(1)
Specialized Bank PENG HENG
5 Phnom Penh(1)
S.M.E Ltd.
6 Best Specialized Bank Phnom Penh(1)
Source: National Bank of Cambodia Review, No.25, 3rd Quarter 2008
Four big banks have captured most of the growth, and dominate the market7
Type of Bank
Number of Leading Market
Bank Share
Big 4 banks
• Market share of 10%+
• Full service with retail and
commercial capabilities. 4 75%
• More than 10 branches
• Generally have ATM and POS
networks 75%
Mid tier
• Market share of 2-5%
• Small number of branches 5 19%
• More limited product offering
Small players
• Market share of 1% or less
• Generally focused on specific
market segments
• Includes specialized banks 22 6%
• One branch operations
• Likely to be subject to
consolidation push
7
Banking sector in Cambodia, ANZ Royal Bank, 2008
Page 12 of 44
CHAPTER II
BANKING MARKET
POTENTIAL
AND CHALLENGE
1. SERVICE PROVISION FROM MAJOR BANKS
1.a. CANADIA BANK PLC
Canadia Bank was the first joint venture between private investor and National Bank of Cambodia.
It was first established as the Canadia Gold & Trust Corporation Limited on 11 November 1991.
The main activities were based on gold transaction, gold plaque manufacture and credit to local
merchants.
On 19 April 1993, the name of the institution was changed to "Canadia Bank Ltd.", and
subsequently to " Canadia Bank Plc." on 16 December 2003, as a commercial bank registered under
the Ministry of Commerce and the National Bank of Cambodia. Since privatization in 1998, the
bank has become one of the largest local banks. It offers various financial services through its ten
branches within Cambodia and 20 international correspondent banks.
The services offering by Canadia Bank include:

 Deposit Account such as Current Account, Saving Account, Fixed Deposit Account in USD,
Khmer Riel or Thai Baht or in Gold. Gold deposit is the only deposit account available in
Cambodia. Interest is calculated in Gold value;
 Trade Finance Service such as the issue and advice of Letter of Credit, import / export
advance drawn under Letter of Credit, Documentary Bills of Exchange and clear bill
collection;
 Travelers Cheque;
 Remittance;
 Foreign Exchange;
 Private Banking which provide one-stop service to VIP customers in such service as Open
new accounts (saving, fixed and current accounts), Cash deposit and withdrawal,

Page 13 of 44
Remittances, Banker’s Cheque, Bank Draft, Payroll Service, ATM Card, Credit Cards (Visa
and MasterCard), Traveler’s Cheque;
 Foreign Investors Consultancy Service on investment climate and incentives, regulations
pertaining to company formation and factory establishment ;
 Real Estate Brokerage and Referee Services which provide brokerage and trustee services
for the rental, sale and purchase of landed properties and issue performance guarantee to
ensure the smooth transfer of property from buyer to seller.
Canadia Bank is a major bank aggressive in SME Loans, Constructions and Mortgages. There have
been many development projects involved with Canadia Bank, from flat house to office building,
from amusement park to shopping mall.
Figure 4: Canadia Bank's Loan Portfolio by Industries, December 2007 (in Million USD)
Transport and Tele

communication,
11.29 Agriculture, 4.22
Import and Export,

13.85 Professional and
Service, 75.74 Private Individual,
1.02
Whole Sale and

Other, 6.51
Retail, 70.57
Building and
Mortgate, 43.78 Manufacturing, 32.4
Construction, 87.29
Source: Canadia Bank's Annual Report with National Bank of Cambodia, 2007
The annual interest rates that applied during the year are as follows:
Type of Loan 2007 2006
Overdrafts 6% - 18% 6% - 18%
Short term loans 7.2% - 21.6% 6.0% - 24%
Long term loans 7.2% - 16.8% 7.2% - 18.0%
Venture capital loans 5%-6.5% 4%-6%
Micro-financing loans 12% - 21.6% 12% - 21.6%
Mortgage loans 7.2% - 12% 7.2% - 18%
Credit card facilities 18% - 22% 18% - 22%
1.b. ACLEDA BANK
ACLEDA Bank Plc. was originally founded in January 1993, as a national NGO for micro and
small enterprises' development and credit. On 7th October 2000 the Microfinance Institution
upgraded to specialized bank and formally become a commercial bank on 01December 2003 and
Page 14 of 44
renamed as ACLEDA Bank Plc to enable it to provide full banking services according to the needs
of the customers and the market.
ACLEDA Bank Plc. is 51% owned by Cambodia interests, including its staff, with the remaining
49% taken up in equal parts by IFC (International Finance Corporation — a division of the World
Bank), DEG (a part of KfW, Germany), FMO, and Stichting Triodos Doen together with Triodos
Custody B.V. as custodian of Triodos Fair Share Fund (The Netherlands). Currently ACLEDA has
the largest branch network in Cambodia.
ACLEDA Bank offers a broad range of banking products and services both personal and business
banking.
Deposits Service
ACLEDA Bank provides many kinds of deposit service such as: Current Account, Demand
Deposit, Savings Account, Fixed Deposit, Corporate Deposit, and Trust Account for Real Estate,
Euro Flex Account, and Trust Services.
Trust Services in ACLEDA Bank is a unique deposit service that ACLEDA Bank is responsible for
maintaining, administering, and arranging the depositor's or third party's money deposited in the
account to use in various purposes that are set forth in an agreement with the bank. The interest
rate is higher than the normal saving account. ACLEDA Bank currently provides three kinds of
Trust Services: Individual Retirement Account, Health Savings Account, and Education Savings
Account.
Credits Service
ACLEDA Bank offers many kinds of credit service such as Micro Business Loan, Small Business
Loan, Medium Business Loan, Personal Loan, Overdraft, Overdraft Facility for Depositors,
Revolving Credit Line, Credit Line, and Housing Loan.
Micro Business Loan

Micro Business Loan by ACLEDA offers to both individual and group up to USD1,500 for the
maximum period of 12 months with interest rate from 2.75% per month or 33.0% per annum.
Small Business Loan

ACLEDA Bank offers small business loan up to 24 months for loan size greater than USD1,500
to less than USD10,000 with monthly interest rate from 2.5%.
Medium Business Loan

Medium Business Loan can have up to 24 months for loan size greater than or equal USD 10,000
to less than USD 30,000; and up to 48 months for loan size greater than or equal to USD 30,000
with monthly interest rate from 2.0%.
Personal Loan
Client with stable income stream can receive loan up to USD30,000 with monthly interest rate at
1.7% for a maximum period of 24 months for personal purpose such as vehicle, furniture and so
on.
Overdraft
ACLEDA Bank offers Overdraft to company for any emergency and unpredictable event and
available from USD5,000 with loan period up to 360 days. The requirements are:-
 Have a potential business with good status, legal profitability;
 Having document presenting company's fixed assets, inventory card, or other
effective documents to deposit as collateral;
Page 15 of 44
 Have a Current Account opening with ACLEDA Bank;
 Offer income statement and balance sheet to ACLEDA Bank monthly.
Overdraft Facility for Depositors
Overdraft Facility for Depositors is for individual customers to make withdrawal more than the
amount in their account balance with loan period up to 12 months. The maximum loan criteria
is
 50% of last month salary for customers who are using Payroll Service with
ACLEDA Bank, or
 50% of average balance customers had in their account for the last consequential
three months and up to USD500 or equivalent to KHR or THB.
Revolving Credit Line
Revolving Credit Line is a short term loan provided to those customers with collateral.
Customers can make withdrawal up to credit limit and the term specified in the Credit Line
agreement and may opt to repay at the end of loan period.
Trade Finance
ACLEDA bank is currently providing Trade Finance Services including Document Collection
on import and export, Document Credit on import and export, Bank Guarantee on Shipping,
bid, payment, advance payment, performance and retention money:
Other Service includes local and international fund transfer, payroll service, tax payment
service, and so on.
Acleda Bank seems less aggressive in Real Estate Loan, but has an enormous share in small and
medium loan as the bank has the largest branch network.
Figure 5: Acleda Bank's Loan Portfolio by Industries, December 2007 (in Million USD)
Agriculture, 35.43
Manufacturing,
14.16
Service, 80.57
Commerce, 184.89
Source: ACLEDA's Annual Report with National Bank of Cambodia, 2007

Page 16 of 44
1.c. CAMBODIAN PUBLIC BANK
Cambodian Public bank is one of the oldest and the biggest bank in Cambodia and started its
business in Cambodia on 25 May 1992. The bank had been awarded "Bank of the Year" by the
Banker for five consecutive years from 2001 to 2005 prior to the arrival of ANZ Royal Bank.
The Bank is a wholly-owned subsidiary of Public Bank Group which is one of the largest and
strongest domestic banking groups in Malaysia. As at 31 December 2006, the Group's
shareholders funds stood at USD2.58 billion, the second highest amongst domestic banking groups
in Malaysia while its assets size amounts to USD42.22 billion.
The Cambodian Public Bank offers a wide range of banking and financial services
 Deposit Accounts: Offers interest bearing Savings and Fixed Deposits accounts and non-
interest bearing Checking (Cheque) account.
 Credit Facilities: Offers Overdrafts, Term Loans, Housing Loans, Letter of Credit, Trust
Receipt, Bank Guarantees, etc.
 Trade Financing: Provides a complete range of import and export services and financing.
 Remittance: Provides international and domestic money transfer including telegraphic
transfer and Drafts.
 Foreign Exchange: Encasement of Travelers Cheque and Currency exchange of major world
currencies.
 ATM Card: ATM Online Service at various branches.
 Credit Card - Merchant Acquiring: Accept VISA and MASTER Cards encashment &
merchant
Figure 6: Cambodian Public Bank's Loan Portfolio by Industries, December 2007 (in Million USD)
Construction, 53.1 Agriculture, 16.53

Im port and Export,
Real Estate, 27.61 5.01
Others, 27.21
Consum er Item s,
39.27
Whole Sale and

Retail, 89.70
Service, 80.12
Source: Cambodian Public Bank's Annual Report with National Bank of Cambodia, 2007

Page 17 of 44
1.d. ANZ ROYAL
ANZ Royal Bank is a newly established bank in 2005 by Australia and New Zealand Banking
Group Limited (ANZ), owning 55% of total shares, and the Royal Group of Cambodia, 45% of total
shares.
ANZ Royal Bank is currently the leader of ATM network and Point of Sale (POS) terminal, and the
only bank that currently provides internet banking in Cambodia. The internet banking, however,
remains in limited service, and the deposit through ATM is still not yet possible.
ANZ Royal Bank has been awarded the 2007 Financial Insights Innovation Award by Financial
Insights Asia Pacific based in Singapore, following the award given by the London publication
“The Banker” as the Cambodian Bank of the Year in 2006.
The current services provided by ANZ Royal are mainly targeting on Personal and Small
businesses.
For personal banking, ANZ Royal Bank provide such deposit service as
Access account
The ANZ Royal Bank Access Account is a non-interest deposit, but allows customer with
unlimited transaction. Instead of paying interest to customer, the bank charges the monthly
account service fee of $1.00 per month.
Saving account
The ANZ Royal Bank Saving Account is an interest payable account and no monthly account
service fee. However, transaction is limited to only one transaction per month, and each
additional transaction, except deposit, leads to a US$1.00 fee charge.
Term deposit
ANZ Royal Bank Term Deposit Accounts offer a bit higher rate of interest but compare to other
banks, the rate offered by ANZ Royal is among the lowest and any withdrawal before maturity
date will incur a charge of US$25.00. The minimum balance is also high at USD2,000.
Premier account
The premier account is for high class customer who has following criteria:-
 Aggregate Deposits held in one or more ANZ Royal Bank accounts totaling US$25,000
subject to maintaining a minimum balance of US$1,000 in an ANZ Royal Bank Premier
Account; or
 Annual Premiership fee of US$250 subject to maintaining a balance of USD 1,000 in an

ANZ Royal Bank Premier Account; or
 Combined deposit and loan amount of US$150,000 with ANZ Royal Bank subject to
maintaining a minimum balance of US$5,000 in an ANZ Royal Bank Premier Account.
Premier account members receive special hospitality in a VIP room by the professional staff of
the bank.
Foreign currency account

With minimum opening balance of US$5,000, ANZ Royal offers foreign currency deposit in
Australian Dollar, Euro, New Zealand Dollar, British Pound, Japanese Yen and Thai Baht.
Page 18 of 44
Credit Service
ANZ Royal provides the lowest interest rate and longest loan repayment period up to 15 years
for its loan. The bank, however, imposes the strictest requirement among major banks for its
client.
ANZ Royal Bank currently provides home loan and home equity loan. The Home Equity Loan
is a loan secured by existing owner-occupied residential property which can be used to
renovate or upgrade the current property, buy a vehicle for personal use, invest in a simple
business (existing or new), support someone's education or other personal purposes acceptable
to ANZ Royal Bank.
Table 7: Credit Service of ANZ Royal Bank to Personal Banking

Home Loan Home Equity Loan
The Home Equity Loan is a loan
secured by existing owner-occupied
residential property which can be
The Standard Home Loan product used to renovate or upgrade the
designed for customers who are current property, buy a vehicle for
Description
purchasing or building a property to personal use, invest in a simple
live in. business (existing or new), support
someone's education or other
personal purposes acceptable to
ANZ Royal Bank.
Interest Rates # 9.5% p.a. (variable) 10.9% p.a. (variable)
Interest Type Variable Variable
Additional Repayments Yes Yes
Early Repayment
None None
Penalty
$100 or 1% of loan amount,

$100 or 1% of loan amount, whichever is
whichever is higher. (For ANZ
higher. (For ANZ Royal Bank @ work
Loan Approval Fee Royal Bank @ work customers -
customers - $100 or 0.50% of loan
$100 or 0.50% of loan amount,
amount, whichever is higher. )
whichever is higher. )
Other associated Costs  Property valuation $80-170  Property valuation $80-160

– One-time fees payable  Legal Fee $264 inclusive of VAT  Legal Fee $264 inclusive of VAT
when Letter of Offer is  Mortgage registration $160-200  Mortgage registration $160-200
issued except  Fire insurance (must be renewed  Fire insurance (must be renewed
insurance* annually) annually)
Maximum Loan
amount (% of property 50% 50%
value)
Loan amount No minimum & no maximum No minimum & no maximum
Maximum Loan Term 15 years 15 years
Other Service includes Telegraphic money transfer, Bank cheque, inward and out ward bank
drafts, and Foreign exchange service.
Page 19 of 44
For Business banking, ANZ Royal Bank provides such service as Overdraft, transactional banking,
treasury/markets, and trade finance.
Transaction banking includes Business Cheque Account, Cash management Account, Foreign
Currency Accounts, Electronic Banking and Payroll Services, and Point of Sale (EFTPOS)
Treasury/markets include foreign exchange service, overseas telegraphic transfers and commodity
trading risk management. The following are some of the commodities where ANZ Royal Bank
provides Risk Management Services:
o Precious Metals: Gold, Silver, Platinum Palladium.
o Base Metals: Aluminum, Copper, Nickel, Zinc, Tin, Lead.
o Energy: Crude oil, Gas oil, Jet Kerosene, Fuel Oil, Thermal Coal.
o Agriculture: Barley, Canola, Cocoa, Coffee, Corn, Cotton, Palm Oil, Sorghum, Soy Complex
(comprising Soybeans, Soy Meal & Soy oil), Sugar, Wheat.
o Power: Electricity
o Environmental Markets: Carbon Credits.
Trade Finance includes Import Letters of Credit, Export Letters of Credit, Import and Export
Documentary Credits, Trade Finance Loans (Local and Foreign Currency), Foreign Currency
Accounts, Export Finance, Forward Exchange Contracts, Export Collections, Guarantees (various
bonds), Standby Letters of Credit.
Figure 7: ANZ Royal Bank's Loan Portfolio by Industries, December 2007 (in Million USD)
Food Industries, 2.5 Import and Export,

2.38
Construction, 5.03
Real Estate, 9.37
Others, 34.4
Consumer Items,
15.68
Service, 50.30
Whole Sale and

Retail, 26.59
Source: ANZ Royal Bank's Annual Report with National Bank of Cambodia, 2007

Page 20 of 44
2. LOAN AND DEPOSIT IN BANKING
By the end of 2007 there were 197,337 borrowers, an increase of 19.6% compared to 2006 when
there were only 164,931 borrowers. The credit to GDP ratio went up to 18.3% in 2007, while the
ratio was 12.2% in 2006 and only 8.5% in 2004. Deposits to GDP rose from 17.9% in 2006 to 26.8%
in 2007.
By the year 2007, total credit granted to customers amounted to KHR 6,335 billion (US$1,582
million), an increase of 77% compared to 2006 when total credit was KHR 3,579 billion (US$882
million). The economic sectors that benefited from bank lending include: the services sector, with
an increase by 57%; the wholesale and retail sector, by 75%; the real estate and public utilities, by
65%; the industry sector, by 52%; and the construction, by 138%.
In addition to a rapidly expanding commercial sector, the nation’s limited consumer-banking

market is poised for rapid growth. Consumer credit is now rarely used as most purchases, even
large ones, are made in cash. Banks are eager to develop and expand new loan products, such as
mortgages and hire purchase loans in order to tap the vibrant consumer markets.
Alongside the continuing financial-sector reform and development, banks will enjoy an increasing
number of options to fund its rapid growth. Deposits are likely to remain on the uptrend by at
least 10-15% per annum. Other funding options include forming joint ventures with offshore banks
and raising funds in the upcoming Cambodian stock market and credit market
Figure 8: Credits and Deposits to GDP
30%
26.8%
25%
20% 17.9% 18.3%

15.1%
14.6%
15% 12.2%
10% 9.3%
8.5%
5%
0%
2004 2005 2006 2007
Credit Deposit
Source: National Bank of Cambodia, Banking Supervision Annual report 2007

Figure 9: Growth in Loan and Deposit

Page 21 of 44
12,000.00 70.0%
63.9%
10,000.00 62.9% 65.0%
59.8%
8,000.00 60.0%
6,335.88
Billion KHR
9,922.47
3,578.44
54.5%
6,000.00 55.0%
2,347.34
50.7%
1,813.69
5,687.04
4,000.00 50.0%
1,333.71
3,927.22
2,632.16
3,327.79
2,000.00 45.0%
- 40.0%
2003 2004 2005 2006 2007
Deposit Loan Loan to Deposit Ratio
3. PROFITABILITY
The Profitability ratio of the whole banking system has shown consecutive increases in profits up
until the present time. The important ratios for the measurement of a bank’s earning capacity are
the Return on Assets (ROA) and Return on Equity (ROE). In 2007, ROE stood at 16.3% and ROA
was 2.8%. Two factors underpin banking sector profitability, firstly, salary expenses are low (a
bank officer is typically paid US$500 per month); secondly, lending spreads are high at 4-5% for
prime loans and 11-12% for small-business loans.
The bank's profit for 2007 derived from the increase in non-interest income by 71% and interest
income by 79%. Besides, recoveries from non-performing loans look a significant proportion of
30% of the current year’s profit.

Page 22 of 44
Table 11: Key Financial Dat a (million of KHR)
Total Asset Capital Amount Customer's Deposit Loan & Advance to Cus Profit After Tax
Name of Bank
2006 2007 2006 2007 2006 2007 2006 2007 2006 2007
Commercial Bank
Cambodian Public Bank 983,973 2,260,384 81,140 180,135 781,955 1,240,226 631,424 1,442,224 98,129 173,569
Canadia Bank 1,522,579 2,242,342 164,491 162,302 1,200,973 1,829,826 833,509 1,335,256 63,215 152,358
ANZ Royal Bank 830,301 2,241,988 89,254 160,120 755,565 2,085,990 209,732 575,581 (28,344) (25,837)
Acleda Bank 900,576 1,899,200 121,710 120,090 497,249 1,377,646 633,080 1,248,409 24,190 41,352
Foreign Trade Bank 896,493 882,057 50,000 52,039 789,569 901,616 177,104 244,796 23,260 52,713
Bank 519,549 651,741 52,741 52,039 421,837 544,640 102,608 160,794 26,889 54,663
May Bank 339,710 579,078 54,364 53,640 235,248 458,937 84,022 127,455 38,090 53,473
Vattanac Bank 287,390 525,085 52,741 52,039 202,273 415,486 165,988 328,215 27,568 49,946
Union Commercial Bank 423,585 484,253 57,407 56,642 339,788 384,182 186,526 264,210 19,499 36,805
Krung Thai Bank 203,423 286,990 52,741 52,039 90,657 123,021 98,505 65,978 21,639 27,915
Cambodia Mekong Bank 109,339 248,674 60,855 140,105 56,330 144,801 11,025 28,988 (44,933) (39,671)
First Commercial Bank 210,930 239,441 52,741 52,039 134,248 154,336 47,736 76,194 21,718 30,548
Corporation 150,818 195,825 52,741 52,039 87,599 132,164 51,335 77,990 (28,172) (15,553)
Advance Bank of Asia 111,765 163,154 52,741 72,054 57,897 88,934 55,375 49,066 10 (18)
Shinhan Khmer Bank - 146,180 - 52,039 - 88,527 - 8,568 - (3,718)
Cambodia Asia Bank 89,866 129,027 52,741 52,039 32,260 67,648 45,602 46,446 2,627 4,339
Camko Bank - 94,792 - 52,039 - 42,315 - 15,922 - (6,038)
Sub Total 7,580,297 13,270,211 1,048,408 1,413,439 5,683,448 10,080,295 3,333,571 6,096,092 265,385 586,846
Specialized Bank
Rural Development Bank 65,195 73,534 28,139 27,871 2,655 3,446 27,075 36,698 2,751 3,423
Specialized Bank 26,938 28,623 15,417 15,211 - - 19,274 25,080 644 2,296
specialized Bank 16,906 20,503 14,200 14,011 594 - 12,985 17,786 1,528 3,288
Specialized Bank - 18,771 20,015 - - 3,066 (2,956)
Industrial specialized 15,684 12,788 12,171 12,009 336 - 9,904 8,579 2,843 690
Anco Specialized Bank 11,030 10,688 10,548 10,408 - - 3,652 6,268 54 253
Specialized Bank - 9,986 12,009 - - - 120 - (2,063)
Sub Total 135,753 174,893 80,475 111,534 3,585 3,446 72,890 97,597 7,820 4,931

Page 23 of 44
The interest rates in Cambodia are determined by the principal rule: supply and demand. The
National Bank of Cambodia does not have any policy to control or decide the interest rates of
banking institutions.
Since the Global Economic Crisis become evident in Cambodia, banks are competing to offer
higher term deposit rate to customers. The one-year term deposit with ACLEDA bank has now
reached 7.5%, while a smaller bank such as ABA provides a slightly higher rate of 8.0% for the
same term. Early 2008, the highest rate was just 6.0%.
Figure 10: Profitability Ratio
18% 16.3%
16%
14.2%
14%
12%
10% 7.9%
8%
6% 5.7%
3.9% 3.8%
4% 1.7% 2.3%
1.8% 2.8%
2% 1.1% 0.9% 1.2%
0% 0.6%
2001 2002 2003 2004 2005 2006 2007
Return on Equity Return on Assets
Figure 11: Net Profit of all Banks
100,000 90,820 140%

129%
120%
80,000
in miliion US$
100%
60,000 54,458 80%
73% 67%
40,000 62% 60%
40% 23,813 40%
20,000 8,512 13,755 20%
0 0%
2003 2004 2005 2006 2007
Net Profits 8,512 13,755 23,813 54,458 90,820
Percentage 40% 62% 73% 129% 67%
change

Page 24 of 44
Table 8: Annual Interest Rate Payment on Deposits, September 2008
Name of Bank Saving Fixed
1 month 3 months 6 months 12 months
Riel USD Riel USD Riel USD Riel USD Riel USD
1 Advanced Bank of Asia Limited 1.00% 8.20% 4.70% 8.25% 5.00% 6.00% 8.00%
2 ACLEDA Bank Plc. 4.00% 2.00% 5.00% 4.00% 6.00% 5.00% 8.00% 6.00% 9.50% 6.50%
3 ANZ Royal Bank 0.50% 0.25% 3.55% 4.05% 4.60% 4.70% 5.55% 5.055 6.70% 5.35%
4 Cambodia Asia Bank Ltd. 2.50% 3.00% 4.00% 5.00% 6.00%
5 CANADIA Bank Plc. 2.00% 0.75% 3.50% 5.00% 4.50% 6.00% 5.00% 7.00% 6.50%
6 Cambodian Commercial Bank 1.25% 0.50% 1.50% 3.00% 3.255 3.25%
Cambodian Mekong Bank
7
Public Limited 3.50% 2.00% 2.25% 2.75% 3.25% 3.50%
8 Cambodian Public Bank 1.00% 1.00% 4.00% 4.25% 6.00% 6.00%
9 Camko Bank 1.50% 3.00% 4.00% 5.00% 6.00%
10 First Commercial Bank 0.40% 1.25% 1.35% 1.45% 1.55%
Foreign Trade Bank of
11
Cambodia 1.50% 0.75% 1.00% 4.50% 3.00% 5.50% 4.00% 6.50% 5.00%
12 Krung Thai Bank 0.25% 0.75% 1.00% 1.25%
13 May Bank 0.75% 1.75% 2.00% 2.50% 3.25%
14 Maruhan Japan Bank Plc. 0.75% 1.50% 3.00% 2.50% 4.00% 3.00% 5.00% 3.50% 6.25% 3.75%
Prosperity Investment Bank
15
Plc. 2.00% 2.00% 3.55% 3.00% 4.60% 4.00% 5.55% 4.75% 6.50% 6.00%
16
Ltd. 0.50% 3.50% 4.00% 5.00%
17 Shinhan Khmer Bank 1.00% 3.05% 3.15% 4.00% 5.00%
18 Union Commercial Bank Plc. 1.00% 4.00% 5.00% 6.00%
19 Vattanak Bank 1.00% 3.75% 4.25% 5.25% 6.00%
20 VIP Bank 0.30% 4.50% 4.00% 4.00% 3.90%
21 Khmer Union Bank
22 Buyoong Khmer Bank 1.00% 1.00% 3.00% 4.00% 5.00% 6.00%
23 Phnom Penh Commercial Bank
24 OSK Indochina Bank
25 Angkor Capital Bank
SPECIALIZED BANKS
1 ANCO Specialized Bank
2
Specialized Bank Ltd.
First Investment Specialized
3
Bank
4 Rural Development Bank 1.50% 1.00% 3.50% 3.00% 4.00% 3.50% 5.00% 4.00% 6.00% 5.00%
Specialized Bank PENG
5
HENG S.M.E Ltd.
6 Best Specialized Bank
WEIGHTED AVERAGE 1.90% 1.02% 4.51% 3.39% 5.22% 4.09% 6.44% 4.90% 7.26% 5.62%

Page 25 of 44
Table 9: Annual Interest Rate on Loan, September 2008
Name of Bank 1 month 3 months 6 months 12 months
USD Riel USD Riel USD Riel USD Riel
Advanced Bank of Asia
1
Limited 14.00% 15.00% 16.00% 18.00%
2 ACLEDA Bank Plc. 24.00% 18.00%
3 ANZ Royal Bank 9.80%
4 Cambodia Asia Bank Ltd. 18.00%
5 Canadia Bank Plc. 24.00% 18.00% 24.00% 18.00% 24.00% 18.00% 24.00% 18.00%
6 Cambodian Commercial Bank 18.00% 18.00% 18.00% 18.00%
Cambodian Mekong Bank
7
Public Limited 14.40% 14.40% 14.40% 14.40%
8 Cambodian Public Bank 18.00% 18.00% 18.00% 18.00%
9 Camko Bank Ltd 13.00%
10 First Commercial Bank 15.00% 15.00% 15.00% 15.00%
Foreign Trade Bank of
11
Cambodia 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00%
12 Krung Thai Bank 13.00%
13 May Bank 15.00%
14 Maruhan Japan Bank Plc. 15.00%
Prosperity Investment Bank
15
Plc. 12.00%
16
Ltd. 18.00% 18.00% 18.00%
17 Sinhan Khmer Bank
18 Union Commercial Bank Plc. 15.00% 15.00% 15.00%
19 Vattanak Bank 11.00% 12.10% 12.47% 13.00%
20 VIP Bank 15.00% 15.00% 15.00% 15.00%
21 Khmer Union Bank
22 Buyoong Khmer Bank 15.00%
Phnom Penh Commercial
23
Bank
24 OSK Indochina Bank
25 Angkor Capital Bank
SPECIALIZED BANKS
1 ANCO Specialized Bank 15.60%
2
Specialized Bank Ltd. 15.00% 15.00% 15.00% 15.00%
First Investment Specialized
3
Bank 18.00% 18.00% 18.00%
4 Rural Development 15.00% 12.00%
Specialized Bank PENG
5
HENG S.M.E Ltd. 24.00% 24.00% 24.00% 24.00%
6 Best Specialized Bank
WEIGHTED AVERAGE 18.89% 16.23% 18.89% 16.38% 18.89% 16.40% 22.45% 15.86%
Robust growth and strong margin
Although bank loans have expanded at an average annual rate of 43% over the past five years,
Cambodia’s financial sector is still in its infancy with a huge growth potential. At year-end 2007,
the private-sector lending was a mere US$114 per capita, which is comparable to Thailand in the
early 1970s, Indonesia and the Philippines in the mid- to late-1980s and Vietnam in 2000.

Page 26 of 44
Despite efforts to increase lending to the poor, only 10 percent of the population can access to the
formal credit and are often forced to rely on high interest, according a report from Phnom Penh
Post in December 2008.
This create an opportunity for existing banks expansion and by 2014-15, the domestic banking
sector is likely to triple from its current size. When the banking sectors of the aforementioned
countries were comparable in size to that of Cambodia at present, they then expanded at an
average annual rate of 24-26% over the subsequent five years. If Cambodia achieves a similar
growth, private loans will surge to US$5billion over the next five years, but will still remain less
than 40-45% of its GDP.
Table 10: Relative development of the Asian region’s banking sector

Current loans As % of Loans at more than Loan growth in
per Capita GDP US$100 per capita subsequent 5 years (%)
Cambodia 114 19 4Q07 Forecast 25-30
Thailand 2,356 75 Early 1970s 15.5
Indonesia 412 25 1985 22.4
Philippines 440 33 1988 25.1
Vietnam 515 80 2000 28.1
4. CHALLENGE IN BANKING SECTOR
The development of banking services is good news for both customers and investors. However,
these services are associated with risks that need to be monitored and supervised in order to
safeguard deposits and the system as a whole. Preconditions for banking development in
particular, and financial development and economic growth in general, comprise four elements
which are effective governance; property rights and their protection; enforcement of contracts and
resolution of commercial disputes; and human capital development.
The challenge ahead for banking sectors are improving profitability, rising non-performance loan,
reinforcing technology, legal framework and risk management, human resources, greater customer
orientation, corporate governance, and international standards.
(i) Improving profitability
The most direct challenge is increasing competition and narrowing of spreads and its impact on
the profitability of banks. The challenge for banks is how to manage with thinning margins while
at the same time working to improve productivity which remains low in relation to global
standards. Thus, with falling spreads, rising provision for Non-performing Assets and falling
interest rates, greater attention will need to be paid to reducing transaction costs. This will require
tremendous efforts in the area of technology and for banks to build capabilities to handle much
bigger volumes.
(ii) Rising Non-performance Loan
Property market downturn will increase non-performing loans (NPLs). Latest supervision report
from the National Bank of Cambodia showed NPLs rising from US$58 million in June 2008 to
almost US$88 million by the year-end. That was 3.68% of banks' loan portfolios, which stood at
close to US$2.4 billion at the end of 2008.

Page 27 of 44
(iii) Reinforcing technology
Technology has thus become a strategic and integral part of banking, driving banks to acquire and
implement world class systems that enable them to provide products and services in large
volumes at a competitive cost with better risk management practices.
The pressure to undertake extensive computerization is very real as banks that adopt the latest in
technology have an edge over others. Customers have become very demanding and banks have to
deliver customized products through multiple channels, allowing customers access to the bank
round the clock.
(iv) Legal framework and risk management
Banking business is exposed to credit risk, market risk and operational risk, which remain viable.
The remaining issues and risk are:
 Lack of reliable information in lending environment- business credit worthiness
 High credit risk (NPL,LE, and real estate collateral and personal guarantees which could
lead to systemic risk);
 Poor collateral registration and valuation;
 High operating cost and low competition as a result of significant market segmentation
 Slow progress of money market development
 Lack of legal framework to enforce commercial contracts
In this context, banks are upgrading their credit assessment and risk management skills and
retraining staff, developing a cadre of specialists and introducing technology driven management
information systems.
At the moment, Cambodia’s court system remains weak as commercial court system has yet to be
set up to fulfill the function of enforcing contracts and resolving commercial disputes.
In order to strengthen the court system’s effectiveness in handling commercial disputes, the
Commercial Contract Law must be enacted and a commercial court system must be developed and
operated under a rule of law to address this fundamental need in Cambodia’s financial and
economic system.
(v) Human Resource
The far-reaching changes in the banking and financial sector entail a fundamental shift in the set of
skills required in banking. To meet increased competition and manage risks, the demand for
specialized banking functions, using IT as a competitive tool is set to go up.
Special skills in retail banking, treasury, risk management, foreign exchange, development
banking, etc., will need to be carefully nurtured and built. Thus, the twin pillars of the banking
sector i.e. human resources and IT will have to be strengthened.
Cambodia’s banking sector development has been and continues to be significantly affected by
human capital constraints resulting from its historical development over the past half century or so.
Progress is being made, with improvements to education at the primary, secondary and tertiary
level, as well as the development of professional programs such as those relating to accounting
and auditing. This foundation, however, requires continuing and long-term efforts.
(vi) Greater customer orientation

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In today’s competitive environment, banks will have to strive to attract and retain customers by
introducing innovative products, enhancing the quality of customer service and marketing a
variety of products through diverse channels targeted at specific customer groups.
This also extends more widely to efforts directed towards consumer education regarding the
benefits of formal finance while at the same time raising awareness of potential risks.
(vii) Good corporate governance
Banks have to be conscious of their responsibilities towards good corporate governance. Following
financial liberalization, as the ownership of banks gets broad based the importance of institutional
and individual shareholders will increase.
In such a scenario, banks will need to put in place a code for corporate governance for benefiting
all stakeholders of a corporate entity.
(viii) International standards
Introducing internationally followed best practices and observing universally acceptable standards
and codes is necessary for strengthening the domestic financial architecture. This includes best
practices in the area of corporate governance along with full transparency in disclosures. In today’s
globalised world, focusing on the observance of standards will help smooth integration with
regional financial markets.

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CHAPTER III
BANKING REGULATION AND
LICENSING
1. CURRENT BANKING REGULATIONS
The Law on Banking and Financial Institution of Cambodia was approved by the National
Assembly on 19 October 1999 and promulgated on 19 November 1999. This law is comprised of 24
Chapters and 76 Articles.
According to the Law on Banking and Financial Institution, banking operation includes:
i. Credit operations for valuable consideration, including leasing, guarantees and
commitments under signature;
ii. The collection of non-earmarked deposits from the public;
iii. The provision of means of payment to customers and the processing of said means of
payment in national currency or foreign exchange.
An entity carrying out only one of these three basic activities, or only one component of each of
these three basic activities, shall be known as a Specialized Bank.
Banks as defined above may, on their own behalf and for their customers, either directly or
indirectly by participating in one or more specialized institutions, carry out securities transactions
which constitute financial intermediation, such as:
i. Taking deposits for the purpose of subscribing or purchasing securities, pursuant to
instructions received from individual customers or from open-end investment
companies,
ii. Subscribing in and trading securities,
iii. Custody of securities,
iv. Individual or collective management of securities,
v. Underwriting of securities upon their issuance,
vi. Financial engineering,
vii. Trading in derivatives, and
viii. All manner of securities transactions on their own behalf, in their capacity as
commercial companies and in compliance with the laws and regulations in force.
Article 9 and Article 10 focused on:

i. The banking and financial institutions defined in Chapter I, and hereinafter referred to
as covered entities, shall be subject to the provisions of this law.

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ii. No person other than a covered entity may carry out banking operations on a regular
basis.
iii. No person other than a covered entity may make use of a business name, corporate
name, and advertising or, in general, any expression implying that it is an institution
authorized to carry out an activity subject to authorization in accordance with the
provisions of this law.
Covered entities shall comply either with the provisions of ordinary commercial law or with the
provisions of the special legislation applicable to noncommercial companies, as well as with the
provisions of this law. In case of conflict, this law shall prevail.
Chapter III of this Law defines covered entities as follows:
A covered entity shall be incorporated either as a public company under commercial law or as a
cooperative or a mutual noncommercial society subject to special statute.
Cooperatives or mutual societies shall belong to a common federative body called a central body.
Central bodies shall be responsible for ensuring cohesion among the entities affiliated with their
network as well as the smooth functioning thereof. To this end, they shall take all necessary
measures, in particular to safeguard the liquidity and solvency of each of these institutions and of
the network as a whole.
The central bodies themselves are considered as covered entities.
A covered entity may be locally incorporated in Cambodia or be a branch of a foreign bank.
With prior approval of the supervisory authority, a foreign bank may open an information, liaison
or representative office in the Kingdom of Cambodia, which office shall not be entitled to carry out
banking operations or financial intermediation and canvassing operations.
Such establishments may be locally incorporated or be a simple entity, a delegate person, or an

office, and shall be so entered in the Trade Registry.
Such offices may use the business name of the foreign bank they represent.
An authorization is given for a period of two years, which may be renewed once only.
Banks can only operate in Cambodia if they get license from the National Bank of Cambodia.
Before issuing a license, the supervisory authority shall ensure:
1. The qualifications of the shareholders and the accuracy of their reported financial position;
2. The ability of the principal shareholders to fulfill, jointly and severally, their obligation to
strengthen the bank own funds if required to do so in accordance with the provisions of
Article 27 of this law;
3. The adequacy of human, technical, and financial resources for the planned activities.
The supervisory authority shall be aware of the reciprocity offered by other countries when the
shareholders of a locally incorporated bank or the head offices of branches of foreign banks are
from said countries.
Minimum Capital and Solvency are very important when opening a bank in Cambodia. According
to this law Article 16 and 17 state that;

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1. Before obtaining a license, a covered entity that is locally incorporated as a company or a
noncommercial entity, whatever its legal form, must have fully paid-up initial capital at
least equal to a sum fixed by the supervisory authority.
2. Before obtaining a license, a branch of a foreign bank must have a fully paid-up capital
endowment at least equal to the minimum capital of a covered entity locally incorporated
as a company.
3. The minimum capital shall be fixed by a regulation issued by the National Bank of
Cambodia. A portion of the minimum capital, equal to a percentage prescribed by a
regulation issued by the National Bank of Cambodia, shall be permanently deposited with
the National Bank of Cambodia as a guarantee deposit.
The minimum capital of commercial banks shall amount at least to KHR 50 billion (US$13
million).
The above amount has been determined on the basis of SDR = riel 5,616.
The guarantee deposit maintained with the National Bank of Cambodia shall amount at
least to five percent of the minimum capital.
4. A covered entity that is either locally incorporated or operating as a branch of a foreign

bank, must at all times be able to prove that its assets minus related potential losses and
intangibles exceed its liabilities to third parties by an amount at least equal to the minimum
capital.
Covered entities must also observe a solvency ratio, the level of which shall be fixed by the
supervisory authority in compliance with international standards. The ratio shall be calculated as a
proportion of the covered entity net worth in relation to its risks.
The Prakas on paid-up capital and conditions of license application No B7-08.193 PK, dated on
19September 2008 noted that;
1- The minimum capital of commercial banks shall amount at least to KHR150 billion.
2- The minimum capital of specialized banks shall amount at lease to KHR 30 billion.
2. KEY CRITERIA TO GET LICENSE
2.a. SPECIALIZED BANK

According to PRAKAS No B700-05 ON LICENSING OF RURAL CREDIT SPECIALIZED BANKS dated on
11 January 2000, Specialized Banks as defined in Chapter I of the Law on Banking and Financial
Institutions (LBFI) and in accordance with Article 14 of this law must obtain a license from the
National Bank of Cambodia (NBC) before starting business.
An applicant for a license of specialized bank shall take one of the legal forms provided for in
Chapter III of the Law on Banking and Financial Institutions. Before obtaining a license, an
applicant must show a minimum registered capital a least equal to a sum fixed by the relevant
Prakas No. B7-08-193 PK, issued by the National Bank of Cambodia.
A- PROCEDURE FOR SUBMITTING A LICENSE APPLICATION

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The application for a license8 shall be drawn up by a dully authorized individual (manager or
person expressly empowered to such effect) and shall indicate the following:
(a) Name or business name of the institution;

(b) Register address of the headquarters;
(c) Legal form and the articles of association or other founding instrument;
(d) Type of securities representing the capital, and connection between the
holding of such securities and the exercise of voting rights;
(e) Amount of authorized and paid-in equity capital;
(f) Distribution of shares and voting rights, and possible agreements between
shareholders acting in concert with a view of directing the policy of the bank.
(g) Capital Contributors which will hold 5 percent or more of the voting rights
must provide the information listed in article 6 of this Prakas;
(h) Identity of at least two persons responsible for the effective direction of the
specialized bank’s business. These designated managers must fill in the
curriculum vitae and questionnaire appended in Annex II and furnishes a
copy of their policies records;
(i) Identify of the members of the decision-making body
(j) If the legal entity for which the application is made has already been
founded, provided a description of its business and certified copies of its last
three audited balance sheets.
(k) Description of the planned activity over the next three years:
 Nature and volume of the difference types of lending liable to appear
on the balance sheet, and other possible service offered to customers
or members (for loans: nature, form, purpose, main terms and
conditions, annual volume, and amount outstanding),
 Type of clients that the institute intends to seek;
 Nature of planned financial resources: own funds, subsidies,
subordinated debt, deposits, borrowing etc…As appropriate, specify
the nature and ownership of these resources in the event of any
ambiguity (Subordinated debt for example);
 Likely number of employees over the next three years and
corresponding payroll, the break down of staff by category;
 Location of existing branches or planned branches,
 Planned organization and resources, especially as regards accounting
procedures and computer system; and
 Balance sheet and profit and loss account forecasts for the next three
accounting periods. Forecast level of main prudential ratios (as
defined by the NBC) at the end of the next three accounting periods.
(l) Internal audit:
8- A letter of application for obtaining a license (Article 14 of the LBFI) for notification purposes (Article 23 of the LBFI) or
to obtain prior authorization (Article 24 of the LBFI), in compliance with the model letter provided in Annex I, must be
submitted.

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 Planned internal audit organization for application of provision of
Article 43 of the Law on Banking and Financial Institutions.
 Identity of proposed external auditors, nature of assignments given
to external auditors.
Capital contributors holding 5 percent or more of the capital or the voting rights of institution
must provide the following information:
(a) Identity of the capital contributor;

(b) Indicate the amount and percentage of the proposed participation and its
equivalent in voting rights;
(c) Describe the activities of the capital contributor;
(d) State whether the capital contributor and the companies possibly associated
with it carry on a financial activities;
(e) Indicate the internal and external audit procedures of the capital contributor.
(f) Indicate whether, over the preceding ten years the capital contributor has
been the subject of an investigation or of a professional, administrative, or
judicial proceeding of a material nature;
(g) State the capital contributor’s objectives for the acquisition of an equity
holding in the institution. Give all relevant information;
(h) Indicate whether there is significant business between the capital contributor
and the applicant and how these relations are likely to develop in the future;
and
(i) Indicate the main banking relations of the capital contributors in Cambodia
and how long these relations have existed.
B- LICENSE APPROVAL AND RELATED FEES
The National Bank of Cambodia shall provide written notification of its decision within three
months from the receipt of application including all relevant documents. Where appropriate, the
approval shall set out the specific conditions laid down by the National Bank of Cambodia for its
entry into force and the timetable for the project. If the project has not been completed upon
expiry of the deadline and if no extension has been requested, the approval becomes void.
An indefinite license shall be provided by the National Bank of Cambodia to all specialized banks
operating in the Kingdom of Cambodia9.
A licensed specialized bank shall maintain an amount equal to five (5) percent of its registered
capital in a permanent account with the National Bank of Cambodia, and be subject to the
following conditions10:
A- Deposit in Riel will bear interest at half of the refinancing rate set by the National Bank
of Cambodia. The interest payment shall be settled semi annually.
B- Deposit in foreign currency will bear interest at three eighths (3/8) SIBOR (Singapore
Inter-Bank Offered Rate). The interest payment shall be settled semi-annually. The
9- National Bank of Cambodia, Prakas No..B7.06-208 Prokor On Admendment to Prakas on licensing of Specialized
Banks , September 13,2006
10- National Bank of Cambodia, Prakas No..B7.06-208 Prokor On Admendment to Prakas on licensing of Specialized
Banks, September 13,2006

Page 34 of 44
National Bank of Cambodia will notify all specialized banks of applicable rate for the
relevant period.
The National Bank of Cambodia will only reimburse the capital deposit to a licensed Specialized
Bank if it voluntarily liquidates and has no deposit liabilities.
The institutions shall pay a fee of KHR 500,000 upon submission of the application for a license.
The annual license fees shall be paid before 15 of January as follows11:
- KHR 10 million for the bank headquarters,
- KHR 8 million for the first to seventh branch of a bank
- KHR 5 million for the eighth branch upward
For institutions established during year, the license fee shall be calculated on a pro rata basis for
the period remaining to year’s end. In the event of late payment of the license fee, the Institutions
concerned shall be fined by paying interest on the overdue payment at the prevailing refinancing
interest rate for a period up to thirty days. If they are not in order after this period, their license
shall be revoked
C- PRUDENTIAL RULES
Applicants with no operating history must pay up 100 percent of registered capital into an account
open with NBC prior to commencement of operations.
A licensed specialized bank shall deposit 5 percent of its deposits into its account maintained with
the National Bank of Cambodia. This reserve requirement shall be maintained under the
conditions set forth in Regulation on reserve requirement.
A licensed specialized bank shall observe all the regulatory requirements to which banks are
subject, particularly the reporting requirements.
D- OTHER PROVISIONS
The specialized bank shall pay a fee of one percent of share capital for such case:-
 Notifications relating to acquisitions or disposals of shareholdings in the context of Article

23 of the Law on Banking and Financial Institutions
 Authorization applications relating to acquisitions or disposals of shareholdings in the
context of Article 24 of the Law on Banking and Financial Institutions
In the event of the appointment of new managers (namely the two persons responsible for the
effective direction of the bank’s business) the following information must be furnished to the
National Bank of Cambodia:
- A document providing proof of such appointment (board meeting minutes for
example),
- Curriculum vitae and questionnaire appended in Annex II.
All these documents must be furnished at least one month before the person concerned takes up
his/her position.
Other changes in the legal or financial status of a specialized bank must be submitted to the
National Bank of Cambodia for approval. Application materials should be accompanied by a
description of the reason for the planned operation and, as applicable, by the following
information:
11
- National Bank of Cambodia, Prakas No..B7.04-205 Prokor On license fee for banks and financial institutions

Page 35 of 44
- Extension or redefinition of activities: the information referred to in
paragraph (k) of Article 5 of Prakas No. B700-05 must be furnished;
- Capital reduction: description of terms and conditions, namely legal and
accounting arrangement and indication of the new amount of own funds
with possible effects on future business and prudential ratios;
- Change in legal form: draft amendments to the Articles of Association and
information concerning management bodies;
- Change in business name: draft amendment to the Article of Association.
All these changes must be submitted to the National Bank of Cambodia at least three months
before their enforcement.
Bank shall pay a fee of KHR 1 million for a change of one page of the Articles of Association.
2.b. COMMERCIAL BANK
According to PRAKAS No B700-04ON LICENSING OF COMMERCIAL BANK dated on 10 January 2000,

Commercial Banks must obtain a license from the National Bank of Cambodia (NBC) before
starting business.
A- PROCEDURE FOR SUBMITTING A LICENSE APPLICATION

In addition to the requirement for a specialize bank, application for a license need to indicate:-
(m) External Audit:
 Identity of proposed auditors, who must obtain the prior authorization
of the NBC.
 Nature of auditors’ assignments.
(n) Headquarter or parent company control ( for branches or subsidiaries of
foreign banks)
 Description of procedures for parent company control of foreign
branches or subsidiaries.
 Description of supervision of foreign branches or subsidiaries by the
competent home country authorities
In addition to the information required by specialized bank, Capital contributors holding 5 percent
or more of the capital or the voting rights of institution must provide additional information as
follow:
(j) Indicate the distribution of share capital of the capital contributor. If need be
state the distribution of the share capital of the parent company and of
intermediate holding companies (give percentages in terms of shareholdings
and voting rights).
List the main managers of the capital contributor.
(k) Provide the accounts of the capital contributor or its parent company for the
last three years and a forecast for the current year (including consolidated
information where applicable). If the capital contributor is a financial
institution, furnish information on the main prudential ratios.

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Each of the two persons expected to be appointed to a managerial position, that is, to be
responsible for the effective direction of the bank’s business, must provide the following
information by filling in the curriculum vitae and questionnaire appended in Annex IV.
(a) Manager’s Identity:

- Full name,
- Date and place of birth,
- Nationality,
- Personal address (give planned place of residence after taking up the
appointment, if different; managers should have their residence close
to the main place of business, namely inside Cambodia).
(b) Qualifications and experience:

- Academic degree as well as date and place where diplomas were
awarded,
- work experience over the past ten years, including the name, place of
business and activities of the employee(s), the type of experience
gained and the level of responsibility.
(c) Indicate whether, in carrying out your duties, you will act in concert with or
in accordance with the instructions of another individual or legal entity
other than the applicant. In either case, give all relevant information.
(d) Describe the managerial tasks for which you will be directly responsible.
(e) Indicate whether you are or in the past ten years have been a significant
shareholder (namely holding directly or indirectly at least 10 percent of the
share capital or voting rights) of a company other that the applicant. If so,
state the name and activities of such company or companies and the amount
of your shareholding or interest in same.
(f) Indicate, to the best of your knowledge, which of the companies in which
you have held or hold a position of responsibility, or in which you have
been or are a significant shareholder, have or might soon have significant
business relations with the applicant.
(g) Indicate whether in Cambodia or abroad you have been the subject of a
professional, administrative, or judicial proceeding resulting in a penalty.
Give all relevant details, as appropriate.
(h) Indicate whether you currently have, or intend to have, an amicable
arrangement with creditors or any other judicial or extra judicial
arrangement, in Cambodia or abroad, for the purpose of settling debts that
you have been unable to honor in accordance with your initial commitments.
State whether you are aware of any such proceedings involving companies
in which you have held or hold positions of responsibility, or of which you
are or have been a significant shareholder. Give all relevant details.
(h) Indicate whether you have been the subject of disciplinary or dismissal
proceedings by any of your employers. If so, give all relevant details.

Page 37 of 44
(i) Indicate whether you are a capital contributor to the applicant and whether
you intend to carry out, either directly or through an intermediary, personal
or professional transactions with the applicant.
(j) Provide all additional information that would appear likely to inform the
National Bank of Cambodia.
(j) All the answers to the above-mentioned questions should be submitted
through the curriculum vitae and questionnaire appended in Annex IV,
together with a letter in compliance with the model letter provided in Annex
II.
B- LICENSE APPROVAL AND RELATED FEES
The National Bank of Cambodia shall provide written notification of its decision within six months
from the receipt of application including all relevant documents. Where appropriate, the approval
shall set out the specific conditions laid down by the National Bank of Cambodia for its entry into
force and the timetable for the project. If the project has not been completed upon expiry of the
deadline and if no extension has been requested, the approval becomes void.
An indefinite license shall be provided by the National Bank of Cambodia to all commercial banks
operating in the Kingdom of Cambodia12.
A licensed commercial bank shall maintain an amount equal to ten (10) percent of its registered
capital in a permanent account with the National Bank of Cambodia, and be subject to the
following conditions:
A- An amount of five percent of their registered capital bearing no interest;

B- An amount of five percent of their registered capital bearing interest at 75 percent
of six month SIBOR.
The National Bank of Cambodia will only reimburse the capital deposit to a licensed Commercial
Bank if it voluntarily liquidates and has no deposit liabilities.
The institutions shall pay a fee of Riel 3.5 Million upon submission of the application for a license.
The annual license fees shall be paid before 15 of January as follows13:
- KHR 70 million for the bank headquarters,
- KHR 56 million for the first to seventh branch of a bank
- KHR 20 million for the eighth branch upward
- KHR 1 million for the branches in districts
For institutions established during year, the license fee shall be calculated on a pro rata basis for
the period remaining to year’s end. In the event of late payment of the license fee, the Institutions
concerned shall be fined by paying interest on the overdue payment at the prevailing refinancing
interest rate for a period up to thirty days. If they are not in order after this period, their license
shall be revoked
12- National Bank of Cambodia, Prakas No..B7.06-207 Prokor On Admendment to Prakas on licensing of Commercial
Banks , September 13,2006
13
- National Bank of Cambodia, Prakas No..B7.04-205 Prokor On license fee for banks and financial institutions

Page 38 of 44
C- OTHER PROVISIONS
The commercial bank shall pay a fee of one percent of share capital for such case:-
 Notifications relating to acquisitions or disposals of shareholdings in the context of Article

23 of the Law on Banking and Financial Institutions
 Authorization applications relating to acquisitions or disposals of shareholdings in the

context of Article 24 of the Law on Banking and Financial Institutions
In the event of the appointment of new managers (namely the two persons responsible for the
effective direction of the bank’s business) the following information must be furnished to the
National Bank of Cambodia:
- The new manager must send a letter informing the Governor of the National Bank
of Cambodia of his appointment as manager and indicating his position;
- A document providing proof of such appointment (board meeting minutes for
example)
- All information as stipulated in the Article 6 of the Prakas (No. B700-04) on the
Commercial Bank Licensing.
All these documents must be furnished at least one month before the person
concerned takes up his/her position.
Other changes in the legal or financial status of a commercial bank must be submitted to the
National Bank of Cambodia for approval. Application materials should be accompanied by a
description of the reason for the planned operation and, as applicable, by the following
information:
- Extension or redefinition of activities: the information referred to in

paragraph (k) of Article 4 of Prakas No. B700-04 must be furnished;
- Capital reduction: description of terms and conditions, namely legal and

accounting arrangement and indication of the new amount of own funds
with possible effects on future business and prudential ratios;
- Change in legal form: draft amendments to the Articles of Association and

information concerning management bodies;
- Change in business name: draft amendment to the Article of Association.
All these changes must be submitted to the National Bank of Cambodia at least three months
before their enforcement.
Bank shall pay a fee of Riel 1 million for a change of one page of the Articles of Association.

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Table 11 : The Summarize table for Criteria’s to obtains license from NBC
Key Criteria Commercial Bank Specialized Bank Microfinance
Minimum KHR150 billion KHR30 billion KHR250 million

Capital(14)
(US$36.50 mln) (US$7.30 mln) (US$70,000)
Capital Guarantee 10% of registered 5% of Registered 5% of Registered

Capital Capital Capital
Reserve - 8% of deposits & 5% of deposit 5% of deposit

Requirement borrowing(LCY)
- 16% of deposits &

borrowing (FCY)
Solvency At least 15% At least 15% At least 15%

Ratio/(CAR)
Liquidity Radio ≥ 50% ≥ 50% ≥ 50%
Application fee KHR3.5 M KHR500,000
Annual License fee KHR70M (HQ), KHR10M (HQ), KHR1M (HQ),

KHR56M ( 1st-7th Branch), KHR8M ( 1st-7th Branch),
KHR20M ( 8th branch ~), KHR5M ( 8th branch ~),
KHR1M (Branch in District)
Note: Exchange rate: 1US$ = 4110 KHR in September 2008
3. THE SUPERVISORY ROLE OF THE NATIONAL BANK OF CAMBODIA

The National Bank of Cambodia is the Central Bank which supervises the banking system and its
related activities such as the money market, the inter-bank settlement system, and financial
intermediation. To this end the Central Bank shall:
1. Issue licenses and define the licensing process,

2. Prepare and keep up to date a list of licensed banks which shall be published in the Official
Gazette of the Kingdom of Cambodia and in the Bulletin of the National Bank of Cambodia,
3. Be empowered to issue regulations for the implementation of this law which authorizes the
Central Bank to determine, in particular the
3.1. Amount of minimum capital and the nature of the assets it is backed with,
3.2. Prudential ratios regarding particularly liquidity, solvency, risk diversification,

foreign exchange exposure, and market risk exposure,
3.3. Valuation rules for accounting balances,
3.4. Conditions under which participations can be taken and held in the capital of a
covered entity or a financial institution,
3.5. Conditions under which participations can be taken and held in the capital of other
banking or financial companies,
14 - National Bank of Cambodia, Prakas No. B7-08.193 ProKor on Capital Requirement and Criteria for Licensing
Approval of Banks, Dated on September 19, 2008

Page 40 of 44
3.6. Debts which must be regarded as doubtful, and the provisioning thereof,
3.7. The chart of accounts, the related accounting standards, the rules for the
consolidation of accounts, and the rules of the disclosure of accounting statements,
3.8. Conditions applicable to the banking and financial operations that may be carried
out in their relations with customers,
3.9. Organization of inter-bank joint services, including the centralization of financial

information, risks, and overdue debts,
3.10. Granting of individual, exceptional, and temporary exemptions,
3.11. Requirements and authorization rules concerning modifications in the business

name, legal form, capital distribution, management and activities of a covered entity,
or of the head office in the case of a branch of a foreign bank,
3.12. Practice of door-to-door selling of banking or financial services,
3.13. After consultation with the covered entities professional association, the rules
governing the operation of a deposit guarantee system,
3.14. And, generally speaking, the modalities for enforcing this law in light of the
differences concerning the legal form of covered entities, the scope of their network,
and the nature of their activities.
4. It publishes all regulations issued by virtue of its authority in the Official Gazette of the
Kingdom of Cambodia and in the Bulletin of National Bank of Cambodia,
5. It supervises the banking system through permanent off-site monitoring and periodic on-
site examinations of each covered entity; if the need arises, on-site examinations may be
extended to a subsidiary of a covered entity or to any other related entities, including
shareholders,
6. It organizes or supervises any inter-bank settlement system,
7. It may require that covered entities, public offices, auditors, and any other individual or
legal entity disclose information considered as useful for its mission,
8. And it may, in accordance with the conditions defined in Articles 52 to 54 of this law, take
disciplinary action.
The supervisory authority’s duty consists of:
1. Licensing covered entities to carry out financial and banking operations in Cambodia,
2. Defining and enforcing prudential rules related to the financial structure and management
that covered entities must abide by,
3. Supervising, permanently but after the fact, through both off-site and on-site examinations,
the financial position and functioning of covered entities,
4. Imposing disciplinary sanctions against covered entities failing to comply with law and
regulations,
5. Referring to the courts if failure to observe laws and regulations undermines the
public interest.

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CHAPTER IV
CONCLUSION
The banking system in Cambodia is two-tier with commercial banks and the central bank. By the
end of 2008, commercial banks have increased in number to 25, 22 local banks and three foreign
branches. The specialized banks reduced from seven to six, but this was a result of one new entry
and two banks upgraded to commercial bank. This is a sign that competition is going to be tough.
Banking in Cambodia remains in developing stage and lack of modern services such as deposit
through ATM, lack of inter-bank market so that commercial banks can borrow from each other at a
low interest rate. However, the existing banks have been competing to provide new financial
services from ATM to Credit Card, from financial consultancy to tax services.
Both credits and deposits have grown rapidly, demonstrating an increase in public confidence in
the sector.
Banks' profitability should continue to be strong, if not bullish, as the interest rate spread remains
high.
Looking at the earnings trend, the return on equity in 2001 was only 1.7% but now it is 16.3%
whereas the return on assets was 0.5% and now it is 2.8%. So it is quite profitable to have a
banking business in Cambodia.
In terms of licensing, banks could be incorporated as a public company, a local company in
Cambodia or as a branch of a foreign bank. A foreign bank may open information, liaison or
representative offices and local and foreign banks are treated equally.
The minimum capital requirement to become such a legal entity is KHR150 billion (US$37million)
for commercial banks, KHR 30 billion (US$ 7.5 million) for specialized banks. In addition, the
candidate bank must have adequate human resources, the individuals must be clearly identified,
and management must have at least two to three years experience, and the business plan must
look forward. It also requires the bank applicant to have a credit policy, accounting system and a
risk management system. Processing the bank license will take six months. Banks are also required
to maintain a statutory deposit of 10% of its registered capital with the National Bank.
Bank supervision regulations have been relaxed to improve the banking sector as it grows bigger.
The license was originally for three years but now it is indefinite. The solvency ratio was originally
20% but now it is only 15%. The liquidity ratio was 100%, but now it is only 50%. Total exposure is
limited to 300% of net worth. Related parties are limited to 10% of net worth.
The lending per capita remains low and poised to grow as witnessed in the neighboring countries.
The US$114 per capita of the private-sector lending was by the end of 2007 comparable to Thailand
in the early 1970s, Indonesia and the Philippines in the mid- to late-1980s and Vietnam in 2000.
The National Bank of Cambodia has been playing an excellent role in supervising, monitoring and
preventing systemic risk in the sector. The monetary policy implementation has focused on
managing the excess liquidity and the over-involvement of banks in the real estate sector which
could have adverse consequences. Among measures undertaken were increasing the statutory

Page 42 of 44
reserve requirement from 8% to 16%, increasing the capital requirement of the banks, and the limit
in real-estate lending.
For a strong and resilient banking and financial system, banks need to tackle significant issues like
improvements in profitability, efficiency and technology, while achieving economies of scale
through consolidation and exploring available cost-effective solutions. These are some of the issues
that need to be addressed if banks are to succeed, not just survive, in the changing environment.
REFERENCES:
4
1- National Bank of Cambodia, Law on Banking and Financial Institute, November 19, 1999
2- National Bank of Cambodia, Banking Supervision Department, Annual Report for 2006
4- National Bank of Cambodia, Banking Supervision Department, Semi-annual Report for the
first quarter of 2008
6- National Bank of Cambodia, Quarterly Bulletin, No 24 2nd Quarter of 2008
7- National Bank of Cambodia, Quarterly Bulletin, No 25 3rd Quarter of 2008
8- National Bank of Cambodia, Quarterly Bulletin, No 26 4th Quarter of 2008
9- National Bank of Cambodia, Quarterly Bulletin, No 27 1st Quarter of 2009
10- ACLEDA Bank, presented at Leopard Cambodia Investment Forum, Raffles Le Royal Hotel
18-19, September 2008
11- ANZ Royal Bank, presented at Leopard Cambodia Investment Forum, Raffles Le Royal
Hotel 18-19, September 2008
12- National Bank of Cambodia, Supervision Department, Report 30-September 2008
13- National Bank of Cambodia, Prakas No. B7.00-04/PrK on the Licensing of Commercial
Banks, Jan 2000
14- National Bank of Cambodia, Prakas No. B7.00-05/PrK on the Licensing of Rural Credit
Specialized Banks, Jan 2000
15- National Bank of Cambodia, Prakas No. B7.00-06/PrK on the Licensing of Micro-financing
Institutions, Jan 2000
16- National Bank of Cambodia, Prakas No. B7.00-39/PrK on Bank's Minimum Capital, Feb
2000
17- National Bank of Cambodia, Prakas No. B7.00-46/PrK on Banks' Solvency Ratio, Feb 2000
18- National Bank of Cambodia, Prakas No. B7.00-47/PrK on the calculation of bank's net worth,
Feb 2000

Page 43 of 44
19- National Bank of Cambodia, Prakas No. B7.00-51/PrK on the classification of and provision
for bad and doubtful debts, including interest in suspense, Feb 2000
20- National Bank of Cambodia, Prakas No. B7.00-52/PrK on controlling bank's large
exposures, Feb 2000
21- National Bank of Cambodia, Prakas No. B7.01-136/PrK on Bank's Capital Guarantee, Oct
2001
22- National Bank of Cambodia, Prakas No. B7.01-186/PrK on Fixed Assets of Banks, Nov 2001
23- National Bank of Cambodia, Prakas No. B7.02-145/PrK on amendment of Prakas No B7.00-
51 on the classification and provision for bad and doubtful debts including interest in
suspense, June 2002
24- National Bank of Cambodia, Prakas No. B7.02-187/PrK on amendment of Prakas on
relating to liquidity for Banks and Financial Institutions, Sep 2002
25- National Bank of Cambodia, Prakas No. B7.02-206/PrK on standardized procedure for
Identification of Money-laundering at the Banking and Financial Institutions, Oct 2002
26- National Bank of Cambodia, Prakas No. B7.02-218/PrK on Adoption and Implementation
of Chart of Accounts for Banking and Financial Institutions, Dec 2002
27- National Bank of Cambodia, Prakas No. B7.04-205/PrK on License fees for Banks and
Financial Institutions, Dec 2004
28- National Bank of Cambodia, Prakas No. B7.06-207/PrK on Amendment to Prakas on Licensing of
Commercial Banks, Sep 2006
29- National Bank of Cambodia, Prakas No. B7.06-207/PrK on Amendment to Prakas on
Licensing of Specialized Banks, Sep 2006
30- National Bank of Cambodia, Prakas No. B7.06-2011/PrK on Reporting date for
Commercials Banks and Specialized Banks , Sep 2006
31- National Bank of Cambodia, Prakas No. B7.09-012/PrK on License fees for Banks and
Financial Institutions, Jan 2009
32- Ministry of Planning, NIS General Population Census of Cambodia 2008, August 2008
33- CLSA U, Blue Books, Experts’ Views for expert investors, September 2008
34- Economics today magazine, Volume 2, Number 28, December 1-15, 2008
Webpage Reference:
1- History of National Bank of Cambodia, National Bank of Cambodia
"http://www.nbc.org.kh/khmer/history-nbckh.asp "
2- Cambodian Public Bank, Service "http://www.campubank.com.kh/services.html"
3- ACLEDA Bank Plc, http://www.acledabank.com.kh/EN/PS_productsUpdates.asp"
4- Canadia Bank Plc, " http://www.canadiabank.com/"
5- ANZ Royal Bank, " http://www.canadiabank.com/"

Page 44 of 44

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INFORMATIVE REPORT

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Table 1: Economic Indicators in Cambodia

1.c. INTERNATIONAL RELATIONS

1.d. TRADE AND INVESTMENT

Figure 1: Cambodia’s Total Exports 2007 (in US$ mln.)

A- External Trade and Capital Movement

Balance on Goods -270.8 -217.6 -329.1 -412.2 -375.7 -277.9

Source: National Bank of Cambodia

B- International Investment Position

Figure 2: International Investment Position Aggregates

Source: National Bank of Cambodia

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2. THE BANKING HISTORY IN CAMBODIA

Table 4: Name of banks before the re-licensing program

3. CURRENT BANKING SITUATION IN CAMBODIA

Figure 3 : Deposit and Loan from banks

Source: ANZ Royal Bank, Banking sector in Cambodia, 2008

5 - National Bank of Cambodia, Annual Report 2007

Table 6: Banks in operation as of November 2008

Phnom Penh(11), Siem Reap(1), Sihanouk Ville(1), Pailin(1)

Phnom Penh(9), Siem Reap(1), Sihanouk Ville(1), Battambang(1),

1. SERVICE PROVISION FROM MAJOR BANKS

1.a. CANADIA BANK PLC

The services offering by Canadia Bank include:

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Transport and Tele

Import and Export,

Whole Sale and

1.b. ACLEDA BANK

Micro Business Loan

Small Business Loan

Medium Business Loan

Source: ACLEDA's Annual Report with National Bank of Cambodia, 2007

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Construction, 53.1 Agriculture, 16.53

Whole Sale and

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 Annual Premiership fee of US$250 subject to maintaining a balance of USD 1,000 in an

Foreign currency account

Table 7: Credit Service of ANZ Royal Bank to Personal Banking

$100 or 1% of loan amount,

Other associated Costs  Property valuation $80-170  Property valuation $80-160

Food Industries, 2.5 Import and Export,

Real Estate, 9.37

Whole Sale and

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In addition to a rapidly expanding commercial sector, the nation’s limited consumer-banking

Figure 8: Credits and Deposits to GDP

20% 17.9% 18.3%

Source: National Bank of Cambodia, Banking Supervision Annual report 2007

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Deposit Loan Loan to Deposit Ratio

Source: National Bank of Cambodia, Banking Supervision Annual report 2007

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Return on Equity Return on Assets

Figure 11: Net Profit of all Banks

100,000 90,820 140%

Source: National Bank of Cambodia, Banking Supervision Annual report 2007

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Source: National Bank of Cambodia, Banking Supervision Annual report 2007

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