The governor of the National Bank of Cambodia and the International Monetary Fund’s country representative led a discussion among lawmakers on Friday about a new banking law that will, among other things, regulate checking accounts and help create an interbank market for debt in Cambodia.
The “Law on Negotiable Instruments and Payment Transactions” draft rests with the Finance and Banking committee of the National Assembly for discussion. Once approved it will be submitted to the Council of Ministers.
“This is a basic law for the developing and strengthening of the financial system,” NBC Governor Chea Chanto said in his speech Friday. “The law’s approval will help Cambodia reach the standards accepted and recognized internationally.”
“This piece of legislation covers payment mechanisms and credit instruments,” IMF legal consultant B Geva said in his speech.
Negotiable instruments are checks, bills of exchange and promissory notes. The latter two can be traded on an interbank market, allowing individual banks to free up money for loans and further extend credit to loan-starved Cambodians.
IMF Representative Robert Hagemann said that the laws, which define the instruments and the legal framework of electronic payment systems, will strengthen the NBC’s regulatory powers.
“It should help to increase deposits as people will feel safer holding their financial wealth in banks rather than cash,” he said.
Increased deposits in an economy dominated by cash transactions should lead to more loans and help the government to fight inflation and promote growth by managing interest rates, he said.
Chea Peng Chheang, secretary of state for the Ministry of Finance, said the payment-transaction aspect of the law will help fight terrorism by tracing deposits of those who may try to hide money in Cambodia’s banking system.
“This law will also be used to fight money laundering,” he said.
