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Investment Insights
Nov 29, 2013

Banking and Finance in Cambodia


by Tim Holzer
 
Currency

 

Despite the recent decline in world economic growth, the National Bank of Cambodia (NBC) reported reduced inflation and a stable exchange rate in its 2012 Annual Report. As a result of effective monetary and fiscal policies adopted by the NBC and the Royal Government of Cambodia, the inflation rate decreased from 4.9% in 2011 to 2.5% in 2012, while Cambodia’s annual average exchange rate remained steady at 4,010 Riel per US dollar.

 
During this time, the NBC also broadened the scope of its supervisory role. As the monetary authority in Cambodia, the NBC implements and oversees compliance with monetary policies and regulations. As of January 1, 2013, the NBC supervises and monitors 43 banking institutions including 32 domestic commercial banks, 7 specialized banks and 4 representative offices, as well as 70 microfinance institutions.
 
Legal Landscape
 
According to the Foreign Exchange Law of 2007, money may be freely and reliably transferred in and out of Cambodia, provided that the transfer is made through an authorized intermediary, that is, a bank licensed by the NBC to operate within Cambodia. However, there are some limited cases in which the NBC may impose exchange controls, such as situations involving national security or during a national emergency. In order to open a bank account, locals and foreigners alike must present certain documents. The exact requirements may differ from bank to bank, but generally the minimum requirements are a copy of the applicant’s ID card or passport, proof of address and proof of income.
 
Cambodian law supports project financing by permitting hypothecs (mortgage) to be registered over immovable property as well as security agreements over moveable property and intangible property. Parties are free to structure their own contractual arrangements, provided that they do not violate mandatory provisions of law, public order and customary practice. Interest on standard transactions is capped at 18%.
 
Although the official tender in Cambodia is the Riel, it is common practice for parties to use foreign currency in contracts and other dealings. The Civil Code provides that parties to a contract may effect payment in any desired currency. If the amount is established in a foreign currency, it may also be paid in Cambodian currency based on the foreign exchange rate at the place where the obligation is performed, when it becomes due.
 
At Sciaroni & Associates, our staff has a broad range of advisory experience in banking and finance matters. For more information on how we can help you with your banking needs, please see our Banking & Finance department.

 
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