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New NBC guidelines on financial institutions

Sok Chan / Khmer Times Share:
A woman checks her cash after taking money from her bank. KT/Chor Sokunthea

The National Bank of Cambodia (NBC) has requested financial institutions to reduce credit-related fees and lift fines until the end of December 2020, according to a letter it wrote.

The central bank has praised financial institutions for their good collaboration and strong adherence to previous NBC measures.

The statement signed by Rath Sovannorak, NBC’s director-general of banking supervision, stated: “In a situation where the world, as well as the Kingdom, is at risk of COVID-19, the central bank seeks the understanding of all banking and financial institutions to offer more customer preferences to ease their burdens during this difficult time, such as reducing credit-related fees and/or waiving any penalty on their clients from the date of this letter to the end of December 2020.”

At the same time, the NBC has requested the leaders of banking and other financial institutions to cooperate effectively.

Kith Sovannarith, deputy director-general of banking supervision at the NBC, told Khmer Times that the situation in banking and finance is good and all financial institutions have responded on time and effectively to requests from customers.

Kith said that the letter is an additional measure which the NBC has requested of financial institutions to help relieve financial burdens on people because some banking and microfinance organisations charge a service fee once customers ask for loan restructuring or a loan moratorium when the customer asks to pay only the principal loan or interest rate, and apply for a new loan.

“We asked them not to charge the service fee. The NBC will issue another measure if needed based on the situation and an assessment of the banking and microfinance sectors,” Kith added. “We saw banking and microfinance organisations respond aggressively to the NBC’s request. They follow the guideline of the National Bank of Cambodia.”

Tongngy Kaing, head of Communication of the Cambodia Microfinance Association, told Khmer Times that the Cambodia Microfinance Association (CMA) welcomed the NBC’s guideline and its members are actively following the banking and finance regulator on the loan restructuring, and the new guidelines for affected customers about COVID-19.

“At this stage, we have not yet made any assessment on the impact of COVID-19 on the financial sector,” Kaing added.

He said that COVID-19 is a global issue, affecting Cambodia’s microfinance sector which has an unavoidable impact. However, the association has assumed that the impact is under control. As of April 24, the microfinance situation remained normal. There is positive growth for both deposits and loans portfolios.

On March 27, the National Bank of Cambodia (NBC) issued a directive to all banks and financial institutions to restructure loans in order to maintain financial stability, support economic activity and ease the burden of debtors facing major revenue declines who may find it difficult to repay loans during the ongoing COVID-19 outbreak.

This directive requires banks and financial institutions to establish a policy and procedure on loan restructurings amid the COVID-19 outbreak and have then approved by the board of directors.

The NBC said that the banks and financial institutions must also pay close attention to clients, with particular attention given to those engaged in the following sectors: tourism (hotels, guesthouses, restaurants, and support services for these industries), garments (including employees of garment factories), construction (only for first-home or shop-construction loans) and transportation (especially taxi and tuktuk drivers) and logistics.

The directive recommends that banks and financial institutions verify that clients are struggling financially before restructuring their loans; loans will be restructured if a client’s interest or principal payments are late but not for more than 90 days (i.e. are still a performing loan) and that the client expects that this period of financial difficulty is only temporary.

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