NBC’s Measures to Support Banks and Other Financial Institutions Amid the COVID-19 Pandemic
1- NBC’s Announcement No. B13-020-002: 05 (five) Supporting Actions to Provide the Additional Liquidity to the Bank and Financial Institution (17/March/2020)
On 17 March 2020, the National Bank of Cambodia “NBC” issued an announcement on five supporting actions to provide the additional liquidity to Bank and Financial Institutions, intending to reduce economic impacts of the COVID-19 and to conform with the policy of the government. Below are key highlights of the new announcement:
- Delay terms implementation for Bank and Financial Institutions to maintain Capital Conversation Buffer (“CCB”) within 50%;
- Reduce the minimum interest rate on Liquidity Providing Collateralized Operation (“LPCO”) in rate by 0.5% for all maturities;
- Decrease the interest rate for Negotiable Certificates of Deposit (“NCD”) which is issued in Khmer riel and U.S. dollar in appropriated limit;
- Reduce the rate on Reserve Requirement (“RRR”) from 8% for domestic currency and 12.5% for foreign currency to 7% for both local and foreign currencies for six months starting from April 2020; and
- Reduce the Liquidity Coverage Ratio (“LCR”) to an appropriated level as it is necessary.
Regarding the above actions, the NBC closely monitore the progress of the banking sector, challenges and potential risks in order to stabilize and contribute the banking and financial sector.
2- NBC’s Prakas No. B7-020-230: The Maintenance of Reserve Requirement Against Bank and Financial Institution’s Deposits and Borrowings (18/March/2020)
Under this Prakas, Bank and Financial Institutions shall maintain reserve requirement against deposits and borrowings at a daily average balance equal to 7% for both local and foreign currencies with the National Bank of Cambodia. This prakas is new regulation and measure of the NBC which allow banks and other financial institutions to have stronger liquidity and to reduce impacts from the COVID 19 to the banking and finance sector and the economy as whole.
Previously, under the Prakas No. B7-018-282 Prokor dated 29 August 2018 on the Maintenance of Reserve Requirement against Commercial Banks’ Deposits and Borrowings, the reserve requirement rate was at 8% in KHR and 12.5% in foreign currencies with the National Bank of Cambodia. Therefore, the Prakas No. B7-018-282 dated 29 August 2018 on the Maintenance of Reserve Requirement against Commercial Banks’ Deposits and Borrowings shall be abrogated
However, the NBC has flexible policy to revise the reserve requirement rate if it is necessary.
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