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CURRENCY EQUIVALENTS (as of 14 November 2001) Currency Unit - Cambodia riel (KR) KR1.00 = $0.00026 $1.00 = KR3835 ABBREVIATIONS ADB - Asian Development Bank BIS - Bank for International Settlements BSD - Bank Supervision Department, National of Cambodia CAMINCO - Cambodia National Insurance Company CBS - Center for Banking Studies DFI - Development Financial Institutions FDI - Foreign Direct Investment FTB - Foreign Trade Bank FIR - Financial Interrelation Ratio GDP - Gross Domestic Product IAS - International Accounting Standards IFAC - International Federation of Accounting IFC - International Finance Corporation IMF - International Monetary Fund ISA - International Standards on Auditing IT - Information Technology MEF - Ministry of Economy and Finance MFI - Micro Finance Institution MOC - Ministry of Commerce MSD - Microfinance Supervision Department NBC - National Bank of Cambodia NBFI - Non Bank Financial Institutions NGO - Non Governmental Organization PCA - Prompt Corrective Action PPTA - Project Preparation Technical Assistance PRGF - Poverty Reduction and Growth Facility RDB - Rural Development Bank SEC - Security and Exchange Commission SEDP - Socioeconomic Development Plan SME - Small- and Medium-sized Enterprise T-Bill - Treasury Bill TA - Technical Assistance NOTE In this report, "$" refers to US dollars. FINANCIAL SECTOR BLUPRINT FOR 2001-2010 I. Banking Sector VISION: A competitive, integrated, Phase I Phase II Phase III and efficient banking system that is (2001-2004) (2003-2007) (2008-2010) properly regulated and supervised and effectively mobilizes saving to Lay Foundation for the Banking Enhance Intermediation Promote Efficiency through provide financing to support the Sector Competition Integration & Reorganization growth of the private sector. Monetary Policy Establish basic framework for Improve monetary policy Develop market-based monetary monetary policy instruments policy framework Streamline reserve requirements. Phase-out reserve requirements. Introduce open market operation Supply government securities. Commence the operation of system with the development of Adopt a plan to implement refinance/rediscount windows. money markets. rediscount facility and refinance window. Supervision and Prudential Establish framework for supervision Improve enforcement of prudential Upgrade prudential regulations Regulations regulations Revise existing regulations and Refine prudential norms in full phase in new regulation consistent Strengthen the implementation of compliance with the BIS guideline. with international standards. PCA. Strengthen with the expansion of Establish surveillance and Commence full on-site inspection non-banking business of banks. inspection procedures. with NBC staff. Establish fully staffed supervision Establish legal and regulatory department. framework and procedures for bank Establish a bank uniform chart of M&A and P&A. accounts and disclosure rule Establish transparent exit consistent with IAS. mechanism and streamline exit Establish a prompt corrective action procedures. (PCA) system based capital Establish legal protection for adequacy. supervisors against lawsuit for Establish an anti-money laundering actions taken in fulfilling official regulation. duties. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-20100) Banking Industry and Competition Restructure Banking Sector Enhance banking service through Facilitate bank reorganization through Restructure/privatize FTB. diversification of banking business incentive and reinforced supervision Complete bank re-licensing and liquidation of problem banks. Diversify the scope of business by Establish an incentive system for Complete the recapitalization of allowing banks to expand business promoting voluntary bank M&A conditionally viable banks. into other non-banking sector. and P&A. Establish contingency plan for Facilitate banks to set up non-bank Reinforce minimum capital banks that do not comply with financial institution (NBIF) requirement for banks involved in MOU conditions. subsidiaries. diverse non-banking businesses. Establish legal and regulatory Strengthen PCA to facilitate early framework for consumer finance. and orderly exit of non-viable Create regulatory framework for banks. banks to undertake credit card service, installment finance, etc. Payments System Establish framework for payment Improve efficiency of payment system Establish an integrate on-line system through IT investment interbanking system Further improve operational Integrate individual bank on-line procedures for both Riel and dollar Establish a central bank wire networks including the central bank cleaning system, considering the system. wire system. compliance capability of Automate the clearinghouse. commercial banks. Establish on-line banking system Adopt a payment law to underpin by increasing investment in IT in the payment system. the banking operations. Improve a back-up mechanism for smooth operation of payment system. Bankers association to adopt a protocol to set up on-line banking system to enable future integration of on-line banking network under the guidance of NBC. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Outreach to the Rural Areas Promote the outreach to the rural areas Strengthen the outreach to the rural by encouraging establishment of area through competition branches. Establish a legal framework for Adopt an incentive system to community-based savings encourage banks to expand institutions (e.g., credit unions, branches into rural areas. cooperative, etc.). Capacity Building Establish framework for and initiate Strengthen NBC organizational Enhance central bank independence basic capacity building. structure. Establish an inclusive bankers Review the authorities of the association. Redesigning division of Central Banking Law to step up the Strengthen capacity building responsibilities among departments independence of NBC. institutions in the public sector: the with new job descriptions. Center for Banking Studies (CBS) Introduce a performance-based to employ full-time instructor with compensation and promotion competitive compensation schemes. system to retain and develop Establish a banking institute for qualified staff. professional training of commercial Establish effective recruitment bankers. system to attract competent staff Strengthen capacity building of into NBC. NBC: compulsory training of new recruits, remedial training of staff with high school education, and intensive training of supervision staff. II. Rural Finance VISION: Establish viable, pro-poor Phase I Phase II Phase II and effective rural finance system for (2001-2004) (2005-2007) (2008-2010) providing affordable financial services to enable the poor to enhance rural income and reduce poverty. Implement the Policy and Institutional Increase Poverty Reduction Impact Enhance Outreach Framework for Rural Finance Sector Implement and Enhance Rural Credit Implement agreed policy actions Policy review and coordination Policy review and coordination Policy (RCP) Make applicable the provisions of Review, and if required amend Policy review and coordination will the Banking Law to develop the RCP in the context of the ongoing continue as in Phase II. rural finance sector. financial sector development Create forum for policy measures. coordination. Coordinate rural finance sector development with intervention in poverty reduction, agriculture, rural infrastructure, irrigation, and agricultural research and extension. Strengthen Supervision and Strengthen supervision and regulation Improve application of prudential Introduce self-regulating mechanism Regulation regulations Establish supervision system for Enhance the multi-sect oral NGOs licensed MFIs consistent with the Strengthen the implementation of to develop a self-regulatory overall framework for the banking supervision and regulatory system. mechanism for minimum service sector. standards. Introduce appropriate prudential Encourage emergence of rating norms for licensed MFIs. agency for licensed MFIs. Review and update prudential norms. Phase I Phase II Phase III (2001-2004) (2005-2007) (20080-2010) Building Rural Financial Facilitate Institutional transformation Establish range of service providers Establish a comprehensive institutional Infrastructure linkages, and services delivery network Establish venture capital and equity Facilitate transformation of funds for licensed MFIs. Establish legal framework for small identified NGOs into licensed Introduce leasing and crop farmer owned credit union and MFIs. insurance. cooperatives. Enhance access to resources of Review equity threshold for community-based groups through licensed MFIs. licensed MFIs. Promote deposit and micro credit through licensed MFIs. Enhance institutional network Enhance flow of term finance for agriculture through resource support and enhanced presence of banks in rural areas. Facilitate transformation of merged/restructured banks into licensed MFIs. Adopt incentive system for CBs to expand in rural areas. Provide support for establishment of licensed MFIs. Deepen and broaden linkages between community group, licensed MFIs and banks. Create institutional Capacity Build sustainable institution Enhance effective intermediation Update and upgrade skills Strengthen Rural Development Develop specialized training Establish linkages with regional Bank. centers. training centers. Comprehensive capacity building Introduce rural finance support for licensed MFIs. specialization in structured Rural finance orientation for banks /reorganized banks. Introduce specialized skills for off- Facilitate downscaling of site and on-site supervision. operations for banks intending to Improve collection, collation and enhance micro finance operations. analysis of rural finance data. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Ensure Pro-Poor Orientation Capacity for optimal utilization of Promote innovative micro finance pilot Enhance outreach to special micro finance services projects finance groups Organizing the poor into Establish pilot projects in resource Replicate successful pilots. community groups for financial poor areas. Enlarge coverage of safety nets. services. Bring innovations to address Enhance capacity of community specific clients groups (e.g., the groups to establish linkages disabled). licensed MFIs. Support capacity building of the poor for management of income- generating activities. Introduce safety net to reduce risks and vulnerability Introduce risk mitigation tailored to the needs of the poor. Extend protection to the savings of the poor. III. Insurance Sector and Pension System VISION: The insurance sector that Phase I Phase II Phase III projects businesses and individuals (2001-2004) (2005-2007) (2008-2010) from catastrophic events and the pension system that of which provide Establish Foundation for Insurance Promote Insurance Market through Strengthen Insurance Sector and capital for long-term investment in the sector and Determine Feasibility for Private Sector Development and Initiate Establishment of Pension real sector. Pension System Establish Foundation for Pension System System Insurance Sector Supervision and Establish regulatory and supervisory Strengthen insurance regulation and Upgrade prudential regulation for Regulations framework for insurance supervisory framework insurance sector Establish and insurance supervisory Refine and complete corpus of Establish an independent insurance unit within MEF. prudential regulations to cover supervisor. Adopt a sub-decree to implement expanded insurance products. Upgrade prudential regulations in the insurance law. Reinforce the insurance supervisory accordance with the insurance Core Establish prudential regulations unit by enlarging staff with Principle of the International including uniform chart of accounts qualified personnel. Association of Insurance and disclosure rule consistent with Adopt a plan to establish an Supervisors (IAIS). IAS/ISA, prompt corrective action independent insurance supervisory Introduce risk-based capital system, etc. agency. requirement. Compulsory Insurance Establish framework for compulsory insurance. Adopt a plan and establish legal framework to implement compulsory insurance. Establish an inter-ministerial working group to develop enforcement and monitoring system for compulsory insurance. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Insurance Industry Organization Establish basis for private sector Promote competitive private sector development insurance market Establish a joint venture between Facilitate private insurance the state-owned insurance company companies' entry into underwriting and a private company. business. Develop a transparent entry Encourage foreign companies' mechanism. participation. Adopt regulations to require all Establish insurance institutions insurance policies to be insured Divest MEF shares in joint venture. locally first. Outreach to the Rural Areas Increase outreach to rural areas Introduce crop insurance, weather insurance, etc. Capacity Building Build capacity of insurance regulators Establish a training institution for the and supervisors insurance sector Conduct intensive capacity building Establish a comprehensive activities for insurance regulators insurance training institution and supervisors. through international cooperation. Establish a training program to Insurance Infrastructure build the enforcement and Develop an actuarial professional body monitoring capacity in the related government agencies. Adopt legal and regulatory framework for a public actuarial system. Create an actuarial profession. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Pension System Legal Framework Conduct feasibility study to establish a Establish legal framework for pension Implement legal framework for pension multi-pillar pension system system system Conduct feasibility study to Adopt legal framework for Adopt sub-decree to implement determine appropriate design and mandatory public pension program. legal framework for mandatory timing for a mandatory public Adopt legal framework for public pension program. pension program, mandatory mandatory privately managed fund Adopt sub-decree to implement privately managed funded pension pension program. legal framework for mandatory program, and voluntary retirement Adopt legal framework for privately managed funded pension savings programs. voluntary retirement savings program. programs. Adopt sub-decree to implement legal framework for voluntary retirement savings programs. Implement mandatory public pension program Introduce mandatory public pension program. Supervision and Regulation Establish regulatory and supervisory Strengthen regulatory and supervisory framework for pension system capacity for pension system Establish supervisory and Refine and complete corpus of regulatory body for pensions. prudential regulations to cover Establish basic prudential expanded pension system. regulations. Reinforce pension supervisory body by enlarging staff with qualified personnel. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Capacity Building Build capacity of pension regulators Establish capacity building institution and supervisors for pension sector Conduct intensive capacity building Establish comprehensive pension activities for pension regulators and industry training institutions supervisors. through international cooperation. IV. Non-Bank Sector VISION: The establishment of diverse Phase I Phase II Phase III non-banking financial products and (2001-2004) (2005-2007) (2008-2010) institutions that create more balanced financial structure, increase the depth of financial market, and promote Establish Foundation of NBFIs Promote Diversification of NBFIs competition. Leasing Business Develop leasing business Adopt a leasing law. Adopt a leasing regulation for commercial banks to conduct leasing business and/or to establish leasing company subsidiaries. Adopt a policy framework for promoting joint venture leasing companies. Money Market Intermediary Develop money market intermediaries Establish legal and regulatory framework for finance companies, investment companies, individuals and money market broker/dealers. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Capital Market Intermediary and Develop capital market intermediaries Develop institutional investors for Institutional Investors capital market Establish legal and regulatory framework for securities Establish legal and regulatory companies/subsidiaries, investment framework for trust business in advisory companies, and securities banks, investment/management finance companies. trust companies, mutual funds, Establish regulatory framework for venture capital companies, etc. banks to establish securities subsidiaries. Establish development finance Development Finance Institutions institutions to promote medium and long-term lending Establish legal and regulatory framework for medium-and long- time export-import credit institution (e.g. EXIM Bank) and development finance institutions; e.g. leveraged leasing companies/subsidiaries. V. Interbank/Money Market VISION: A money market that Phase I Phase II Phase III enables an inter-bank market that (2001-2004) (2005-2007) (2008-2010) provides banks, companies, and individuals with the means for effective liquidity managing. Establish the Foundation for Strengthen Interbank Market Increase the Depth of Money Market Interbank Market Interbank Market Arrangement and Establish interbank market Expand the scope of the interbank Establish an integrated interbank Scope arrangement for the banking sector market market Establish interbank market Establish the framework for an Allow all financial institutions to arrangement procedures for interbank market into allow for the participate in interbank/money commercial banks. participation of NBFIs, including market. insurance companies, etc. Develop a standardized interbank RP contract. Money Market Instruments Create an enabling environment for Establish regulations, governing Establish regulations governing non- money market development financial institutions' instruments financial institutions' instruments Establish a negotiable instrument Adopt procedures and regulations Adopt regulations for trade bills, law. for negotiable certificates of deposit and commercial papers (CP). Set up a regulatory framework for (CDs), repurchase agreement (RPs), interbank/money market activities. banker's acceptance (BA), etc. Issue central bank securities (e.g., central bank CDs). Treasury Bills Create an enabling environment for Develop Treasury Bills Market Treasury Bills Introduce primary dealer system for Adopt regulatory framework for the the government securities. issuance of Treasury Bills. Regularize the issuance of Treasury Issue Treasury Bills through Bills. competitive auction. Capacity building for staff in National Treasury and NBC who are involve in Treasury Bill Issuance. VI. Capital Market VISION: An efficient and transparent Phase I Phase II Phase III capital market with a critical mass of (2001-2004) (2005-2007) (2008-2010) issuers that mobilizes funds for long- term investment. Create an Enabling Environment for Establish the Foundation for Capital Development of Capital Markets Capital Markets Markets Legal and Regulatory Framework Establish key legal and regulatory Establish a capital market surveillance Strengthen Capital Market Supervision framework framework and Surveillance Establish a master plan for creating Establish an independent Securities Upgrade prudential regulations in a functional capital market and Exchange Commission. accordance with IOSCO principles. framework. Conduct a feasibility study to assess a critical mass of potential securities issuers. Adopt s Securities and Exchange law. Exchange regulations ( listing requirements auction rules for trading, corporate disclosure, membership, etc.). Securities Exchange Establish securities exchange Promote capital market participation Create Securities Exchange Board Adopt an incentive system for large Set up a computerized trading firms to go public. system. Adopt corporate governance Establishment of capital market guideline for large public infrastructure: Securities depository corporations. system, clearing system, etc. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Fixed income securities Create an enabling environment for Promote issuance of public bonds Develop private bond market public bonds Establish an incentive system to Establishing regulatory framework Establish regulatory framework for create demand for government for corporate bond market. medium-and long-term government bonds, such as Treasury and other Establish legal and regulatory bond, and issue Treasury Bond and Government savings bonds. framework for the issuance of government savings bond. bonds of large banks and Establish legal and regulatory development finance institutions. framework for local government, Establish bond market public instrumentality, and SOEs to infrastructure: OTC trading and issue bond and notes price quotation system. Capacity Building Capacity building for future capital Strengthen capacity building for the Strengthen capacity building for capital market participants public market participants Conduct an intensive capacity Develop a comprehensive program Create an association of securities building for capital market for public awareness activities. brokers and dealers. regulators through international Establish a capital market training cooperation. institution. Adopt a training program for capital market participants. VII. Financial Market Infrastructure VISION: Legal and accounting Phase I Phase II Phase III systems that promotes the rule of law (2001-2004) (2005-2007) (2008-2010) in commercial and financial transaction and support good governance by promoting Develop key Legal, Accounting, and Strengthen Enforcement and Establish Enhance Financial Market transparency, accountability, and Information Infrastructure Safety Net Infrastructure and Safety Net predictability Legal Framework for Commercial and Financial Transactions Create key legal infrastructure to Strengthen law enforcement Enhance legal infrastructure for private underpin the financial sector sector development development Develop adequate compensation scheme for commercial jurist. Establish legal framework for Adopt a company law, a Establish commercial chamber in public registration system for bankruptcy law, a secured the court system. movables. transactions law, etc. Establish a public secured Adopt a civil code and procedure. transaction system. Implement a Master Plan for judicial reform. Adopt a law on Organization and Function of the Court including establishment of commercial chamber. Accounting and Audit Standards Establish accounting standards and Strengthen enforcement of Enhance the enforcement of accounting enforcement system accounting/audit standards standards Adopt a law on Corporate Promote competition in local Apply IAS/ISA to private Accounts, Their audit and the accounting industry to encourage companies. Accounting Profession. new entry to reduce Phase-in IAS/ISA. accounting/audit compliance costs Establish an accounting standards of the private sector. board. Establish an association of accountants and auditors including a committee on Education and Ethics. Adopt a Code of Ethics for auditors. Strengthen capacity building institution for accounting and audit. Phase I Phase II Phase III (2001-2004) (2005-2007) (2008-2010) Financial Market Information Infrastructure Create financial market information Expand the scope of sharing credit Diversified and enhance information system information system Establish arrangement for sharing Formalize the membership of the Introduce a credit rating system. credit information in the bankers arrangement for sharing credit association. information to include other credit institutions. Automate the arrangement for sharing credit information. Financial Market Safety Net Enhance the banking sector safety net Enhance financial sector safety net Introduce a deposit insurance Expand deposit insurance system system for the banking sector. into other credit institutions who Adopt corporate governance participated in the payment system. guideline for banks. Adopt corporate governance guideline for non-banking institutions.
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