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Financial institutions give their support to NBC’s liquidity plan

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Through several measures recently announced by the Central Bank, experts estimate an additional $2 billion in credit will be made available to businesses. Hong Menea

Financial institutions give their support to NBC’s liquidity plan

The National Bank of Cambodia (NBC) on Wednesday announced the release of two more policies to increase liquidity in the local economy.

Together with three other measures announced recently, experts estimate an additional $2 billion in credit will be made available to businesses.

On Wednesday, the Central Bank said it is reducing the reserve requirement rate (RRR) on deposit balance from eight to seven per cent on the Khmer riel and 12.5 per cent on the US dollar during the next six months. The measure also affects the liquidity coverage ratio (LCR).

The announcement was made via videoconference by NBC director-general Chea Serey.

Earlier this week, NBC said it is delaying the conservation capital buffer (CCB) requirement to 2021, which is expected to lower the solvency ratio.

The central bank also reduced the interest rate on the liquidity-providing collateralised operation (LPCO), a financial tool that allows NBC to lend to financial institutions in the local currency.

LPCO’s interest rate has been cut to 2.5 per cent a year (from three per cent); 2.3 per cent for six months (from 2.8 per cent), and 2.1 per cent for three months (from 2.6 per cent).

NBC also announced the deduction of the interest rate on the negotiated certificate deposit (NCD), a tool that allows the financial sector to deposit with NBC to earn interest.

Serey said the goal of the new policies was to support businesses as they battle the effects of the Covid-19 outbreak on the economy.

“The purpose of these policies is to support economic growth as the country faces the Covid-19 threat. NBC continues to closely monitor the development of the situation inside and outside Cambodia,” she said.

Phnom Penh Commercial Bank (PPCBank) president Shin Chang Moo praised the Central Bank for its proactive stance. He said the bank’s actions will make more cash available to small and medium-sized businesses.

“NBC has been very responsive to the plight of small businesses as they struggle to survive in a very unfamiliar situation. This stimulus package will help businesses and individuals,” he said.

“The recent measures will enhance the ability of financial institutions to accept more credit risk with increased liquidity. More importantly, NBC is giving financial institutions the freedom to decide how to apply the packages according to their portfolio and risk capacity,” Shin said.

Prasac Microfinance Institution executive vice-president Say Sony also supported the measures.

“They will help increase liquidity and make more funds available for lending,” he said.

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