Month: June 2020

Banking Operations in Cambodia

A banking license is a mandatory legal authorization for any financial institution seeking to conduct banking-related activities within Cambodia. The Cambodian financial landscape comprises three primary institutional categories: commercial banks, specialized banks, and microfinance institutions (MFIs), with additional minor licenses available for fintech operations. Each type of institution offers distinct services and is subject to specific legal, capital, and operational requirements.

License Issuance

The National Bank of Cambodia (NBC) is responsible for granting banking licenses to corporations that fulfill its stringent criteria. These requirements encompass minimum capital thresholds, directorial composition, shareholder residency, shareholding distribution, and beneficial ownership disclosure, among other stipulations. The specific conditions may vary based on the desired license type.

Obtaining a banking license can be a protracted, intricate, and costly process, influenced by factors such as the license category and the intended bank structure (public or private). For instance, a general banking license empowers an institution to engage in a full spectrum of banking services, including retail banking, merchant acquiring, cash management, asset management, and trading.

Capital Requirements

In a significant regulatory move, NBC introduced new minimum registered capital requirements for financial institutions through Prakas issued on March 22, 2016. These mandates, outlined below, were to be implemented within a two-year transitional period.

• Licensed commercial banks: $75 million
  • Branches of investment-grade foreign banks: $50 million
  • Branches of non-investment-grade foreign banks: $75 million
• Specialized banks: $15 million
• MFIs with deposit-taking licenses: $30 million
• MFIs without deposit-taking licenses: $1.5 million

Non-compliance with NBC directives may result in severe penalties, including fines, legal prosecution (for individuals), license revocation, directorial dismissals, or provisional administration.

Marital property or Joint property

Cambodia’s Civil Code distinguishes between marital and separate property. Marital property, acquired during marriage, is generally considered joint property, while separate property, owned before marriage or acquired through inheritance or gift, belongs solely to one spouse. Marriage partners may exclude certain property from marital property through prenuptial or postnuptial agreements.

The Code defines marital property as all property earned by either or both spouses during the marriage, excluding property owned before marriage or acquired through gift or inheritance. However, the law is unclear on whether income generated from separate property, such as interest from premarital savings or rental income from inherited land, becomes marital property.

Issue to be considered

The Code provides a basic framework for property division but leaves significant ambiguities. For instance, it’s unclear whether income from separate property—such as interest on premarital savings or rental income from inherited land—is considered marital or separate property. This lack of clarity can lead to disputes during divorce proceedings.

In practice, rental income from inherited land is often considered marital property. However, any increase in the land’s value during the marriage is typically treated as the inheriting spouse’s separate property. Upon selling the land, the full proceeds generally belong to the original owner.

Distinguishing between income generated by property and the property’s increased value can be complex. For instance, if a spouse inherits controlling shares in a company, determining which portion of the annual profits is marital property is challenging. This is especially true when the shareholder can control dividend payouts.

To ensure equitable property division, couples contemplating marriage or facing divorce should seek legal counsel to understand the complexities of Cambodian property law.