The Deputy Director General for banking supervision at the National Bank of Cambodia says the banking industry is the most transparent of all the industries in Cambodia.

The NBC’s Chea Serey, who has participated in the evolution of Cambodia’s banking system since 1999, says she’s proud of that transparency because the stewardship of the monetary system is part of the public trust.

“This is the money of the general public and it is our money, yours and mine” Chea Serey in an interview on Wednesday at NBC headquarters on Norodom Boulevard.

 “All of our families and friends deposit money in the banks. It is our strong interest to make sure the banks are playing safe. And banks have the obligation to be transparent to the general public.

In fact you can walk into any bank and even if you don’t have an account there, they are required to provide you with their annual audited report,” she said.

The transparency required of all banks operating in Cambodia as mandated by the NBC means it is difficult for illegal activity to take place.

“When all your numbers are audited, you can’t embezzle. NBC is also audited by an external auditor as well. All banks have to justify where this money’s coming from and where it is going to,” she said.

Born in Phnom Penh in 1981, she attended Batuk School until the sixth grade and then carried on her education in France for middle and high school and finally Singapore at the French International School.

 Chea Serey joined the NBC in 1999 following her graduation from Victoria University in Wellington, New Zealand. In 2002, she joined the NBC’s banking supervision department and has risen through the ranks since then.

Chea Serey’s banking supervision department employs more than 100 people.

NBC is an independent regulatory and supervisory organisation, not under any ministry.

She remembers back in 2000 when she first joined, NBC ordered the liquidation of 17 banks that were unable to meet the minimum requirement of $13 million in paid-up capital.

“We closed them down,” she said. “We can close down banks if they don’t comply with our regulations and it is also in our power to change the management of a bank if they are not doing their job.

We have the right to approve or disapprove their members of the board,” she said.

Today, the minimum requirement is $37 million in paid up capital, but even with that amount of money, being a bank in Cambodia is regarded as a privilege.

“Banking is not like any other business. That’s why they are strictly regulated.”

More than 1,200 people are employed by NBC and many of them women, a unique and arguably beneficial feature of Cambodia’s financial landscape.

 She says it is amusing when all-male delegations arrive from the World Bank or IMF and they are met with colourfully dressed Cambodian women on the opposite side of the room.

When she started work at the NBC, there were 16 banks and now there are 38, seven or which are specialised banks and 32 commercial banks.

“Those are mostly foreign banks, and I think it is a good sign. When a country is able to attract more banks says something about the country’s potential.”

Chea Serey is acutely aware that political stability of paramount importance for any financial system.

“You can talk about any other factor, but if you don’t have political stability nobody will come. You have to have predictability if not certainty when you do business by investing in a country.

Therefore when you see investors coming in, it is a good sign that they trust in us and that they would also bring along a lot of capital. If you consider one bank bringing in $50 million, you do the math, that’s a lot of money,” she said.

She cited a study by the World Bank that showed a strong correlation between access to finance and economic growth. That’s why she’s happy so many banks are coming to Cambodia. Yet, she is watchful of competition in the marketplace and what that means for the financial system, which can be good and bad at the same time.

“Banks coming in provide finance and create competition which lowers interest rates. Interest rates on loans have come down if you read our annual reports from 16 per cent to 10 to 12 per cent.

Yet at the same time, if too much competition is injected into the marketplace, it can be detrimental for the whole financial system,” she said.

“Banks need to make a profit. If the competition is too fast and too stiff it can also be bad. If your profit is compromised, you may curtail development.NBC is making sure that competition is fair and doesn’t dampen the development and compromise the stability.

Another issue for the NBC is the dollarization of the economy, which Chea Serey explains was a consequence of Cambodia coming out of post-conflict poverty and the UNTAC period.

“People tended to not trust the local currency and we saw the greenback coming in when the laws and regulations were not so strict, so it just happened and we’re stuck there, and it is difficult to reverse the trend.”

Generally people use another currency is because they don’t trust domestic currency because inflation rates are too high – and today in Cambodia, the inflation rate is very low compared to other parts of the world.

“Our inflation rate is very low, this year only 1 per cent year on year, and the exchange rate is very stable, about 4000 Riel per dollar during the past 15 years. This is a good ground for people to save in local currency”

She said that NBC has developed a draft national strategy to promote the use of local currency.

“Our intention is to have all the price quoted in Riel, though customers can have the choice to pay in Riel or USD for a transition period.” she said. “We will have a public consultation, consultation among the ministries and hopefully the government will adopt it we hope before the end of this year. De-dollarization is very critical now.”

Chea Serey says Cambodia needs to have the ability and the tools to set interest rates.

“We need to be able to use our local currency because it shows our independence and shows our sovereignty.”

As for the future, Chea Serey approaches it with cautious optimism. “I see a lot of potential in the banking system. I see development coming and potential in contributing more to the economy, more to poverty reduction and banks are starting to provide mortgage loans. Newly married Cambodians are getting loans for houses. Microfinance institutions are providing loans for motorcycles and appliances.”

She said that while rapid growth is good, there are mechanisms in place to “put on the brakes” if the economy starts to get overheated.

“We are moving too fast, we can use tools to put on the brakes. At the moment we are watching very cautiously on the speedometre and it is going okay. We need to see if the road is conducive to that speed. If the bank is going too fast and the economy is not there, it’s a problem. If the economy can absorb it, we will be okay. We look at road conditions and the speedometre, and we watch for any hazards, warning sign along the road.”

Some of the recent work of the NBC includes the development of the “Interbank Market” by the third quarter of this year which enables banks to use the NBC’s negotiable certificates of deposit.

Banks will be able to use the Interbank Market for their liquidity management, she said.