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New NBC policies to promote liquidity

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National Bank of Cambodia director-general Chea Serey said the capital conservative buffer is an addition to three measures taken earlier this month to open access to credit. NBC

New NBC policies to promote liquidity

Cambodia's Central Bank on Thursday issued a capital conservative buffer to ensure liquidity and promote lending amid the outbreak of Covid-19.

Speaking to the media via teleconference on Tuesday, National Bank of Cambodia (NBC) director-general Chea Serey said the capital conservative buffer is an addition to three measures taken earlier this month to open access to credit.

In early March, NBC said the requirement for financial institutions to reserve at least 50 per cent of their capital will be delayed until late 2021.

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).

The last measure announced by NBC this month is 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.

“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.

Serey said the Central Bank has already met with the Cambodia Microfinance Association and the Association of Banks in Cambodia to find ways of aiding the sector.

“We decided to implement these measures to promote liquidity in the economy to help businesses. We want financial institutions to continue lending,” she said.

Microfinance Institution Prasac’s vice-president Say Sony supported the measures.

“I think these policies are beneficial to the banking sector. We will continue lending to businesses that need liquidity,” said Sony.

On March 5, NBC encouraged banks and money-deposit taking institution (MDIs) to continue disbursing loans and possibly suspend interest for businesses impacted by the Covid-19 outbreak, especially in the tourism industry.

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