NATIONAL ASSEMBLY

Kingdom of Cambodia

Nation Religion King

No. NBC/B700/04
January 1, 2000

Prakas

On the Licensing of Banks

The Governor of the National Bank of Cambodia

Referring to the 1993 Constitution of the Kingdom of Cambodia;
Referring to Kram No. NS/RKM/0196/27 of January 26, 1996 promulgating the Law on the Organization and Functioning of the National Bank of Cambodia;
Referring to Kram No. NS/RKM/1199/13 of November 18, 1999 promulgating the Law on Banking and Financial Institutions;
Referring to Kret No. CS/RKM/0398/85 of March 10, 1998 on the appointment of H.E. Chea Chanto as Governor of the National Bank of Cambodia;
Pursuant to the request of the Banking Supervision Department of the National Bank of Cambodia.

IT IS HEREBY DECIDED

Chapter 1
General Provisions

Article 1: Banks as defined in Chapter 1 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) prior to commencement of operations.

Article 2: An applicant for a bank license shall take one of the legal forms provided for in Chapter III of the Law on Banking and Financial Institutions.

Article 3: Prior to obtaining a license, an applicant must show a minimum registered capital a least equal to a sum fixed by the relevant Prakas issued by the National Bank of Cambodia.

Chapter 2
Procedure for Submitting a License Application

Article 4: The application for a license¹ shall be drawn up by a duly authorized individual (manager or person expressly empowered to such effect) and shall indicate the following:

(a) Name or business name of the institution.

(b) Registered address of the headquarters or of the branch in Cambodia in the case of a foreign company.

(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. In the case of branches of foreign companies, this amount must be at least equal to the sum referred to in Article 3 of this Prakas.

(f) Distribution of shares and voting rights, and possible agreements between shareholders acting in concert with a view to directing the policy of the institution;

(g) Capital contributors who will hold 5 percent or more of the voting rights must provide the information listed in article 5 of this Prakas.

(h) Identity of at least two persons responsible for the effective management of the bank's business;

These designated managers must provide the information listed in Article 6 of this Prakas and furnish a copy of their police records. For managers of foreign nationality who have been resident in Cambodia for less than 3 years, the above‑mentioned police record shall be replaced by a document issued by the competent home country authorities certifying that the person concerned is not prohibited from managing a financial institution under the terms of that country's regulations.

The managers of Cambodian branches of foreign banks must be appointed by the competent authorities at headquarters.

(i) Identity of the members of the decision-making body. This information must be supplemented by a curriculum vitae and a questionnaire as provided for in Annex IV and a statement certifying that none of the individuals concerned is subject to the prohibitions set forth in Article 18 of the Law on Banking and Financial Institutions; the majority of the members should have at least three years of credit experience evidenced by the curriculum vitae of the member concerned.

(j) If the legal entity for which the application is made has already been formed, provide 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 different types of lending liable to appear on or off the balance sheet (for loans: nature, form, purpose, main terms and conditions, annual volume, and amount outstanding);

Nature and volume of other services offered to customers (savings accounts, provision of means of payment, asset management, etc...);Type of clients that the institution intends to seek (private individuals, companies, international organizations, institutional investors);

Nature of planned financial resources: own funds, shareholder advances, negotiable debt instruments or bonds, deposits from the general public, borrowings on the interbank market, etc.;

Likely number of employees over the next three years and corresponding payroll, broken down by category of staff; Planned organization and resources, especially as regards attracting clients (possible creation of branches) and accounting procedures and computer system;

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) Audit procedures

Planned internal audit organization for application of provisions of Article 43 of the Law on Banking and Financial Institutions;

Methods for setting internal limits on the various types of exposure and planned procedures for ensuring compliance;

Planned procedures for ensuring compliance with ethical standards, particularly as regards financial transactions with clients, and for taking part in the fight against money laundering;

Composition and duties of the audit committee.

(m) External audit:

Identity of proposed auditors, who must obtain the prior authorization of the NBC.

Nature of auditors' assignments.

(n) Headquarters 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.

Article 5: Capital contributors holding 5 percent or more of the capital or voting rights of the institution must provide the following information:

(a) Identity of the capital contributor: In the case of a legal entity, indicate the business name, legal form, address of the headquarters and furnish the Articles of Association. In the case of an individual, state his or her full name, date and place of birth, nationality (dual where appropriate) and domicile. Indicate whether this person is to be appointed one of the managers of the institution. State whether the capital contributor is to be represented on the institution's board of directors; if so, ensure that this representative is not subject to the prohibitions set forth in Article 18 of the Law on Banking and Financial Institutions. For all these purposes each individual concerned must fill in the curriculum vitae and questionnaire appended in Annex IV.

(b) Indicate the amount and percentage of the proposed participation and its equivalent in voting rights. Describe in detail the legal and financial arrangements for the acquisition of the securities. If the contributor is an individual, indicate precisely the origin of invested funds. State whether the transaction is subject to particular formalities in respect of regulations such as those applicable to foreign direct investment in Cambodia and whether such formalities have been complied with.

(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.

Article 6: Each of the two persons expected to be appointed to a managerial position, that is, to be responsible for the effective management of the bank's business, must provide the following information² 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 degrees as well as date and place where diplomas were awarded;

work experience over the past ten years, including the name, place of business and activity of the employer'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 he (they) will be directly responsible.

(e) Indicate whether he (they) is/are or in the past ten years has/have been a significant shareholder's) (namely holding directly or indirectly at least 10 percent of the share capital or voting rights) of a company other than the applicant. If so, state the name and activities of such company or companies and the amount of his/their shareholding's) or interest in same.

(f) Indicate, to the best of his/their knowledge, which of the companies in which he/they has/have held or hold a position of responsibility, or in which he/they has/have been or is/are a significant shareholder's), has/have or might soon have significant with the applicant.

(g) Indicate whether in Cambodia or abroad he/they has/have been the subject of a professional, administrative, or judicial proceeding resulting in a penalty. Give all relevant details, as appropriate.

(h) Indicate whether he/they currently has/have, or intends to have, an amicable arrangement with creditors or any other judicial or extra judicial arrangement, in Cambodia or he/they is/are or has/have been a significant shareholder. Give all relevant details.

(i) Indicate whether he/they has/have been the subject of disciplinary or dismissal proceedings by any of his/their employers. If so, give all relevant details.

(j) Indicate whether he/they is/are a capital contributor to the applicant and whether he/they intends) to carry out, either directly or through an intermediary, personal or professional transactions with the applicant.

(k) Provide all additional information that would appear likely to inform the National Bank of Cambodia.

(l) 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 Il.

Article 7: A capital contributor which will directly or indirectly hold at least 20 percent of the capital or the voting rights shall be considered as an influential shareholder in accordance with the provisions of Article 26 of the Law on Banking and Financial Institutions. Influential shareholders might be enjoined by the NBC to increase the net worth of the institution under the conditions described in Article 27 of the Law on Banking and Financial Institutions. For that purpose, a letter in accordance with the model set forth in annex III must be sent to the Governor of the NBC.

Such a provision will only be removed when a reliable a deposit insurance scheme is set up in Cambodia.

Chapter 3
Approval and Related Fee

Article 8: The NBC shall provide written notification of its decision within 6 months from the receipt of application including all relevant documents. Where appropriate, the approval shall set out the specific conditions laid down by the NBC 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.

Article 9: A License is valid for a period of 3 years, from the approval date. Said license may be renewed only if all possible infractions of relevant laws and prudential regulations have been remedied. An application for renewal of a license shall be submitted to the NBC at least three months prior to the expiration of the existing license. In the event this deadline is not met, a fine of Riels 1,000,000 per day of delay up to the submission date shall be imposed.

Article 10: The institutions shall pay a fee of Riels 3.5 million upon submission of the application for a license.

Article 11: The annual license fee shall be paid before January 15 as follows:

Riels 70 million for the bank headquarters.

Riels 56 million for each branch of a bank

For institutions established during the year, the license fee shall be calculated on a pro rata basis for the remaining period to the year's end. In the event of late payment of license fee, the institutions concerned shall be fined by paying interest on the overdue payment at the existing refinancing interest rate for a period up to 30 days. If they are not in order after this period, they would be subject to more serious penalty including the revocation of their license.

Chapter 4
Other Provisions

Article 12: Banks shall at all times maintain with NBC a capital guarantee deposit of 10 percent of their registered capital under the following conditions:

an amount of 5 percent of their registered capital bearing no interest;
an amount of 5 percent of their registered capital bearing interest at 75 percent of six month SIBOR.

The NBC will only reimburse the capital deposit to a bank if it voluntarily liquidated and has no deposit liabilities.

Article 13: Notifications relating to acquisitions or disposals of shareholdings in the context of Article 23 of the Law on Banking and Financial Institutions must include a description of the reasons for the transaction and the objectives pursued.

Notification documents should also include information, as described in Article 5 above on the capital contributors concerned.

In addition, the banks shall pay a fee of 1 percent of share capital for such a change in shareholdings.

Article 14: Authorization applications relating to acquisitions or disposals of shareholdings in the context of Article 24 of the Law on Banking and Financial Institutions must include a description of the reasons for the transaction and the objectives pursued.

Application documents should also include information, as described in Article 5 above, on the capital contributors concerned. Contributors seeking to hold directly or indirectly at least 20 percent of the share capital or voting rights may be required by the NBC to sign a letter in accordance with the model given in Annex III. In addition, the bank concerned shall pay a fee of 1 percent of share capital for such a change in shareholdings.

Article 15: In the event of the appointment of new managers (namely the two persons responsible for the effective management of the bank's business) the following information must be furnished to the NBC:

The new manager must send a letter conforming to the model set forth in Annex Il informing the Governor of the NBC of his appointment as manager and indicating his position;
A document providing proof of such appointment (board meeting minutes for example);
The information referred to in Article 6 above.

All these documents must be furnished at least one month before the person concerned takes up his position.

Article 16: Other changes in the legal or financial status of a bank must be submitted to the NBC for approval. Application materials should be accompanied by a description of the reasons for the planned operation and, as applicable, by the following information:

Extension or redefinition of activity: the information referred to in paragraph k of Article 4 of this Prakas must be furnished;
Capital reduction: description of terms and conditions, namely legal and accounting arrangements 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 Articles of Association.

All these changes must be submitted to the NBC at least three months before their enforcement.

Banks shall pay a fee of Riels 1 million for a change of one page of the Articles of Association.

Article 17: This Prakas shall enter into force from the date of its signature.

Article 18: The General Director, the General Secretariat, the General Cashier, the General Inspection, all NBC departments, and all specialized banks under the NBC supervisory authority shall be responsible for the enforcement of this Prakas.

Phnom Penh January 10, 2000
Governor

CHEA CHANTO

1. A letter of application for obtaining a license (LBFI, Article 14) for notification purposes (LBFI, Article 23) or to obtain prior authorization (LBFI, Article 24), in compliance with the model letter provided in Annex 1, must be submitted.

2. The NBC must have, with regard to the appointment of managers, all information necessary to assess the good repute, fairness, and worthiness of the person concerned.