Chea Serey, director-general of the National Bank of Cambodia since 2013, talks to Peter Janssen about building a post-conflict banking environment and not signing up to Basel.

Chea Serey

Q: Many of Cambodia’s banks are foreign owned. Why has the National Bank of Cambodia [NBC] allowed this?

A: We are open to everybody. It has to do with our legacy. Cambodia is a post-war country and we needed development and we needed it fast. We’re in the rapidly growing region of Asean [the Association of South-East Asian Nations] so we can’t just go at our own pace. We can’t crawl or start by walking. We had to get up and run. 

Q: In 1999 Cambodia passed its banking and financial institutions law, resulting in some 17 banks going under and some people losing their savings along with their faith in the banks. Why was the shakedown necessary?

A: There were banks coming in and some didn’t meet our standards. So we had to restructure all that. And our view is that we want foreign direct investment, first of all. We need capital desperately and only a bank from overseas with a strong reputation can bring that in for us. There were people who were tremendously affected by the restructuring. Rebuilding confidence is a difficult exercise, but so far, as the central bank and regulator, we are quite satisfied with developments. If you look at all the other post-conflict countries, Cambodia probably has the most foreign banks. What I think is worth noting is that when a foreign bank comes here, they bring along their best practices and know-how as well as their home country investors.

Q: Is Cambodia trying to comply with Basel I, II and III?

A: I think the Basel Core Principles for Effective Banking Supervision is a terrific document. I think that is something we should benchmark ourselves to, but when it comes to Basel I, Basel II and Basel III, there are things in there which we cannot possibly comply with. We have to agree that these rules are for internationally active banks. If banks are not internationally active they may not apply. In Cambodia we think there are good elements of Basel I, good elements of Basel II and good elements of Basel III. We cherry-pick what would suit our system best and make rules for the banks to comply with.

Q: The Cambodian economy and the banking system are US dollar-based. Should the system be based on the riel?

A: We have to be honest with ourselves in terms of what the dollar brings to us, and I think there is the good side and the not-so-good side. Dollars bring some benefits because when you are a new country, and you’ve been exposed to war, it’s good to be able to invest in dollars so at least you know that you are not exposed to currency risk. The downside is that dollars bring uncertainties as well, in terms of the effectiveness of our monetary policies, because there are things we can’t implement when our country is not using the same currency the central bank issues. At this stage the central bank is embarking on a campaign to promote the use of the local currency by maintaining macroeconomic stability but also promote awareness about the benefits of using the local currency, make our banknotes more attractive and encourage businesses to adopt local currency as their operating currency, among other things.

Q: How are you preparing for fintech?

A: It’s terrifying but it’s also exciting. I think we will embrace it but at the same time we have to be very cautious. We are working with the fintech community because I think it’s important to know about it early on, bearing in mind that regulators must not be the enemy of innovation.


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