Regulation December 31, 1994 Classification of Doubtful Debts

REGULATION DATED DECEMBER 31, 1994

ON THE CLASSIFICATION OF AND ON THE POLICY REGARDING

THE CREATION OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS BY A COMMERCIAL BANK

No 794 - 78 PRK

The Governor of the National Bank of Cambodia,

Having seen the Constitution of Kingdom of Cambodia;

Having seen the Kret 14 dated January 8, 1992 of Council of Minister;

Having seen the Kret of His Majesty Samdeech Preah Norodom Sihanouk King of Cambodia dated November 11, 1993 to maintain H.H. Thor Peng Leath as Governor of NBC;

Having seen the Law on the Supervision of Financial Institutions promulgated by the Decree 89 KRA dated August 27, 1992;

Having seen the Anukret 29 ANK on the Supervision of commercial Banks dated November 16, 1992;

Decides:

Article 1:

Each bank shall provide the National Bank of Cambodia with information on:

The quality of its credit.
Policy for the creation of provisions for bad and doubtful credit.

Article 2:

A bank shall place its credit operations (inter-bank, customers, securities) as a minimum into the three undermentioned categories:

2.1- healthy credit: is one that poses no problems for present or future repayment provided that each such credit in whatever form, including overdrafts, shall have a maturity date.

2.2- unpaid debt: is debt on which any payment overdue for less than three months.

2.3- doubtful debt: is any debt, secured or unsecured, that possesses one of the following characteristics:

2.3.1- a payment has been overdue for three months or more.

2.3.2- where there is a probable or certain risk of a partial or total non recovery for a future maturity.

2.3.3- when the debt is disputed.

Article 3:

The amount of a doubtful debt comprises the amount of an overdue unpaid maturity, the remaining principal outstanding plus overdue accrued interest of accounted.

Article 4:

Sound signature commitments and contingent liabilities given by a bank shall be distinguished from those that have become doubtful. A commitment shall be deemed doubtful whenever the following conditions have been fulfilled.

4.1- when a bank is likely to be called upon to honor its guarantee.

4.2- the giver of the order is deemed likely to be unable to reimburse the bank after it honors its guarantee.

Article 5:

The existence of a doubtful debt in the name of a customer, whether a body corporate or an individual requires the classification as doubtful of all the outstanding of that customer of whatever nature or maturity.

Article 6:

A bank shall be able at all time to:

6.1- provide a detailed list of its credits according to the categories given in Article 1 for each type of operation (interbank, customer, securities..........)

6.2- show it has a prudent policy on creating provisions for doubtful debt.

Article 7:

This regulation applies from the accounting period ending on December 31, 1994.

The Governor of NBC

Thor Peng Leath