How To Get a Bank License in Cambodia?

Introduction  

The banking system in Cambodia includes commercial banks, specialized banks, microfinance institutions (“MFIs”), rural credit institutions, financial leasing companies, third-party processors, credit bureaus, representative offices, payment service providers, and money changers. Of these entities, commercial banks play a crucial role in providing financial services to the general public and businesses, ensuring economic and social stability, and the sustainable growth of the economy. As of this writing, there are 51 licensed commercial banks in Cambodia; these include local commercial banks, subsidiaries of foreign banks, and branches of foreign banks. Some of these emerged from the conversion of MFIs to a commercial bank, some from mergers between MFIs and banks, and others from the conversion of a specialized bank to a commercial bank. Among these 51 commercial banks, Canadia Bank Plc. is the largest locally established commercial bank in terms of the total assets for 2019, at KHR26,934,389 million (approximately US$6,733,597,250), amounting to 15.7% of the market share, and in terms of deposits for 2019, at KHR21,517,385 million (approximately US$5,379,346,250)¹ while Advance Bank of Asia Limited, owned by National Bank of Canada, is the largest established foreign bank subsidiary in terms of the deposits for 2019, at KHR13,718,510 million (approximately US$3,429,627,500)².  

During the last three years, the banking market in Cambodia has changed remarkably. Despite the departure of ANZ out of the joint venture ANZ Royal Bank Plc., Cambodia has welcomed J Trust, which is a Japanese diversified financial holding company listed in the Tokyo Stock Exchange, to operate commercial bank activities under the name “J-Trust Royal Bank Plc.” This Bank is a joint venture between J Trust and the Royal Group, one of Cambodia’s largest conglomerates, and started operations in Cambodia in August 2019 following the acquisition of a majority shareholding in the bank formerly known as ANZ Royal.  

The Cambodian banking market has also welcomed a European bank. The existence of Bred Bank Plc. in Cambodia, with its parent company being a French bank, adds the financial soundness and reliability of the banking system of Cambodia.      

Banks and financial institutions operating in Cambodia are subject to Cambodian banking and finance laws and regulations and to the supervision by Cambodia’s central bank, the National Bank of Cambodia (the “NBC”), which is the sole regulator of the banking sector. The NBC has, among others, the power to: (i) issue licenses to banking and financial institutions; (ii) issue policies and regulations in order to regulate banking and financial institutions; and (iii) take disciplinary action against institutions that are not in compliance with the relevant laws. 

Licensing of a commercial bank  

Under Cambodian law, anyone wishing to operate a commercial bank in Cambodia must establish a public limited company with the relevant Cambodian governmental authorities and obtain a banking license from the NBC before commencing business. Operating without a license carries disciplinary sanctions and a fine of up to approximately US$75 million.  

Unlike other countries, Cambodian banking law does not require that a newly established commercial bank have a minimum number of branches. Further, there is no requirement on the minimum number of employees to be employed by the bank. However, following the general labor law, employment of expatriates is limited to 10% of total employees. Special approval must be obtained from the relevant labor authority if a bank intends to employ expatriate employees exceeding the 10% limitation. 

Some of the key conditions to obtain a banking license in Cambodia as a branch or a subsidiary of a foreign bank are:  

• Minimum capital: US$75 million³  
• Experienced management team: The bank must assemble a qualified management team (which includes the board of directors and managers) with individuals that, among other things: have an appropriate educational background related to banking and finance so that they have sufficient understanding of the busines and its related risks; meet the NBC’s standards for being fit and proper for the position; and have not been convicted or found guilty of a criminal or disciplinary offense or sentenced to prison and can provide a clean criminal record or police clearance to the NBC.   
• Shareholder qualifications: The shareholder of a commercial bank can be either an individual or a corporate entity having related banking and financial skills or experience.  
• Business plan: The bank must have a three-year draft business plan ready that includes information on the nature and volume of the different types of lending and other services offered to customers (savings accounts, provision of means of payment, asset management, etc.), the types of clients that the bank intends to seek, the 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.), projections on the number of employees over the next three years, organization plan and resources, financial statement projections, feasibility study, and the major contributions it will make to the banking sector of Cambodia. 
• Physical operating location: The bank is required to have a physical location to operate its banking activities in Cambodia.  

Process  

Below is the process to establish a local commercial bank in Cambodia: 

Reservation of the name of the entity to be established    

The applicant must reserve a name for the entity through the Ministry of Commerce’s (“MOC’s”) online system. Within one to three days, the MOC will respond by email with approval or rejection of the name.  

Applying for an approval-in-principle from the NBC  

After obtaining the MOC’s email confirmation on the name reservation, the applicant must apply for an approval-in-principle on the establishment of a commercial bank in Cambodia from the NBC. For this purpose, the applicant must submit to the NBC certain documents and information as required by it such as: (i) application form, (ii) business plan, (iii) minutes of the meeting of shareholders, (iv) articles of incorporation, and (v) financial statement of each shareholder. 

The timeframe for the NBC to issue an approval-in-principle is approximately three months once all required documents and information have been submitted to the NBC.   

Registration of the entity to be established with the MOC   

After obtaining the approval-in-principle from the NBC, the entity must register with the MOC. This is straightforward and is done through the MOC’s online system. For this purpose, the applicant must submit, among others, the following documents to the MOC: (i) the AOI that was approved by the NBC; (ii) the MOC application form; (iii) shareholders’ resolutions; (iv) lease agreement; (v) passport/ID card and photos of shareholders and directors; (vi) POA appointing the authorized representative of the entity to be established; and (vii) the MOC’s standard declaration of not guilty and not a civil servant.  

Documents are filed through the online system and then the necessary hard copies of the registration documents must also be submitted to the MOC for its records. Registration approval takes approximately one week after submission of all required documents and information to the MOC. 

Upon successful registration, the entity must produce a corporate seal (stamp) that meets the MOC’s standards. Once registered, the applicant will obtain a certificate of incorporation and its AOI with the MOC’s stamp affixed.      

Registration of the entity with the General Department of Taxation  

Following registration with the MOC, a company must register with the General Department of Taxation (“GDT”). Failure to register with the GDT in a timely manner will most likely result in penalties being charged. Tax registration requires that an application file be completed Registration is conducted through an online system and usually takes around one week.  

Registration with the Ministry of Labor and Vocational Training  

The Cambodian Labor Law requires employers and employees to register with the Ministry of Labor and Vocational Training (“MLVT”). Therefore, a registered company must register with the MLVT, as well as apply for an annual quota approval to employ expatriate staff. In addition, both Cambodian and expatriate staff must possess a work permit and an employment card. Work permits for expatriate employees must be renewed annually; Cambodian employees are not subject to this renewal requirement.  

Those employing eight or more people are also required to appoint a staff representative, as well as to register internal rules with the MLVT.  

Like the MOC and the GDT, registration with the MLVT is done through an online system and will take approximately one week upon submission of all required documents and information.    

Applying for the banking license  

Upon obtaining all the approved documents from the MOC, GDT, and MLVT, the entity is required to apply for a banking license from the NBC by submitting certain required documents and information to the NBC. If all required documents and information are complete in the NBC’s view, the NBC will issue the license within a couple of weeks.    

Applicable fees 

The applicant is required to pay the following fees for the banking license and entity registration.  

Authority	Types of government fees	Amount (US$)
National Bank of Cambodia	Inquiry information fee	250
	Administration fee	1,250
	License fee	37,500
Ministry of Commerce	Company name search	6.25
	Registration with the MOC	252.50
General Department of Taxation	Tax registration	100
	Patent tax	625
Ministry of Labor and Vocational Training	Labor registration with the MLVT	30

Conversion from a microfinance to a commercial bank 

In order to promote or expand the business regarding loan deposits and expanded services, certain MFIs have merged with existing licensed commercial banks, some have converted themselves to commercial banks, and others are in the process of conversion. The transformation from an MFI to a full-fledged commercial bank brings higher numbers of deposits and loans. The conversion helps MFIs to scale up their banking operations in Cambodia and allows MFIs to offer their clients more banking options. In addition, MFIs may gain the confidence of the public, lenders, and depositors; in turn, this public confidence will serve to attract more deposits and funding. 

Below is the list of MFIs changing their stratus from MFIs to commercial banks:  

• Sathapana Limited, which was one of the largest microfinance-taking-deposits, merged with Maruhan Bank Plc. in 2016; the consolidation of these two institutions resulted in a commercial bank under name of “Sathapana Bank Plc.”  

• Phillip Bank Plc. merged with Kredit Microfinance in 2020, and the new entity operates under the name “Phillip Bank Plc.” 
• Hattha Kaksekar Limited, which was one of the largest microfinance-taking-deposits, has converted itself to a commercial bank and operates under the name “Hatta Bank Plc.”  

Process  

Approval-in-principle request from the NBC 

The conversion requires the approval of the NBC, which is the supervisory authority of banking institutions in Cambodia. Commercial banks or MFIs are first of all required to request an approval-in-principle for the conversion from the NBC. For this purpose, they must submit certain documents and information as required by the NBC. Among those documents, the business plan is the most important required document. In order to convert to a commercial bank, an MFI must meet the requirement of a commercial bank such as registered capital, corporate governance, any policies such as credit policy, anti-money laundering policy, human resource policy and other policies, and other compliance which the commercial bank is generally required by banking laws and regulations of the NBC to comply with. It would take around six months⁴ to obtain the approval-in-principle from the NBC.    

Commercial Bank License request from the NBC 

Besides the NBC’s approval-in-principle, the implication of such conversion also involves other relevant authorities, such as the MOC, GDT, and MLVT. After obtaining all approved documents from these authorities, the MFIs must submit the application form, the required documents, and information to the NBC to request for the commercial bank license in accordance with the banking law and regulations. After obtaining those required documents and information, and if the NBC, at its discretion, is of the view that they are complete and satisfactory, it will issue a commercial bank license within approximately six months⁵ to the MFIs.    

Disclaimer: The information provided herein is based on the laws and practices at the time of publication, and as such, is subject to change. This text is to be treated as background information only and is not intended to constitute legal advice. Readers should seek specific and proper advice if they intend to proceed with the establishment of a bank in Cambodia.