Patrick Smith
Managing Partner,
Head of Banking & Finance Practice Group.
Patrick has over 20 years of experience of advising on banking and finance matters. He started his career in London with Bankers Trust and Deutsche Bank and has worked at leading global law firms in London, Australia and Japan on a wide spectrum of banking and finance matters including lending, debt capital markets, structured finance, repackagings, OTC derivatives, trade finance, asset finance, securitizations and regulatory/compliance matters. Patrick has advised leading multinational corporations and global financial organizations and governments and is widely recognized as an expert in his field. Admitted to the Supreme Court of Victoria as a Barrister and Solicitor, he holds an LL.B and BA (Hons.) from Monash University.
National Bank of Cambodia increases minimum registered capital requirements for financial institutions
By Patrick Smith
The National Bank of Cambodia (the “NBC”) issued prakas (regulation) B7-016-117 (the “Prakas”) on 22 March 2016, setting out new minimum registered capital requirements for licensed banks, specialized banks, and microfinance institutions (“Financial Institutions”). The new minimum registered capital requirements, which are set out below, must be met within two years of the date the Prakas was issued (the “Transitional Period”).
The Prakas does not provide penalties for failing to meet the minimum capital requirements it requires. However, under article 27 of the Law on Banking and Financial Institutions (1999) (the “LBFI”) the NBC shall require “influential shareholders” (those holding 20% of the relevant licensed entity’s shares) to inject capital into a licensed entity “if the financial position … so warrants.” Failure to meet the new capital requirement set out in the Prakas would appear to be a circumstance in which the “financial position…so warrants”. The NBC has not indicated whether it will review the financial position of Financial Institutions during the Transitional Period for compliance with the Prakas.
Influential shareholders that fail to comply with an order from the NBC pursuant to article 27 of the LBFI may be fined and/or, with respect to individuals only, imprisoned. With respect to the relevant entity, non-compliance could result in temporary or permanent withdrawal of its license, compulsory resignation of or more directors, and/or provisional administration.
The Prakas provides for the following changes to minimum capital requirements for financial institutions (all amounts in USD):
- The minimum capital requirement for locally incorporated licensed commercial banks, whether subsidiaries of foreign banks or otherwise, is $75 million.
- The minimum capital requirement for branches of investment grade foreign banks is $50 million.
- The minimum capital requirement for branches of non-investment grade foreign banks is $75 million.
- The minimum capital requirement for specialized banks is $15 million.
- The minimum capital requirement for MFIs with a deposit taking license is $30 million.
- The minimum capital requirement for MFIs without a deposit taking license is $1.5 million.
The Prakas requires that all licensed commercial banks and specialized banks meet the new minimum capital requirements and repeals provisions of prakas B7-07-163 on New Capital Requirement and Criteria for Licensing Approval of Banks (2008) which provided that the minimum capital requirements for a bank or specialized bank depended upon whether the bank or specialized bank had an influential shareholder that was a foreign bank or financial institution with an investment grade rating.
The Prakas does not expressly contemplate how it impacts entities which are in the process of obtaining, or planning to obtain prior to the end of the Transitional Period, a license to become a Financial Institution. The Prakas does not state whether such entities are required to meet the minimum capital requirements set forth in the Prakas in order to obtain the relevant license.
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