Further information about Instruments
| Instruments | Facility type | Role in Monetary Implementation | Purpose | Features |
|---|---|---|---|---|
| Liquidity-Providing Collateralized Operations (LPCO) | Short-Term Repo | Key instruments (7D) and structural liquidity tools | Provide short-term and structural liquidity. |
|
| Negotiable Certificate of Deposit (NCD) | Short-Term Central Bank Bills | Floor rate and structural liquidity | Absorb short-term and structural excess liquidity |
|
| Marginal Lending Facilities (MLF) | Standing Lending Facilities | Ceiling rate | Provide immediate liquidity |
|
| Outright purchase and sales of gov’t bonds | Market-based trading of government bonds by NBC | Fine-tuning instrument | Liquidity management and complement key instruments to meet operational objective |
|
| Reserve Requirement | Mandatory reserves held by financial institutions at NBC | Address structural liqudity | Support monetary and prudential objectives |
|
| Foreign Exchange Spot Transaction | FX spot purchase or sales of Riel | FX intervention directly affects exchange rate | Maintain orderly FX market conditions and support macro stability |
|
| FX Forward and Swap (In progress) | Derivative transactions involving the future exchange of currencies | Fine-tuning instrument | Manage FX liquidity and smooth short-term currency mismatches |
|
NBC uses a suite of monetary tools to achieve its objectives:
a. Repurchase Agreement (Repos)
The Liquidity-Providing Collateralized Operations (LPCO) is a repurchase agreement (Repos) transaction of the National Bank of Cambodia used to provide liquidity in Khmer Riel to financial institutions to facilitate the management of liquidity and promote the use of Khmer Riel. Financial institutions can use Negotiable Certificate of Deposit (NCD), Government securities and Current Account at the NBC as collateral.
The minimum bidding rate for 7-day LPCO is set as a reference rate for interbank money market transactions and the rate shows the monetary policy stance of NBC.”
LPCO supports banks’ funding needs under normal market conditions, encourages collateralized interbank activity, and strengthens the transmission of monetary policy.
| Purpose | Liquidity providing in local currency. |
|---|---|
| Participants | NBCP members that have signed the Repo Master Agreement with NBC. |
| Transaction type | Repurchase agreement (repo). |
| Currency | KHR. |
| Frequency | Weekly. |
| Tenor | 7 days, 91 days, 182 days. |
| Interest rate & allotment | Determined by the Monetary Policy Committee. |
| Mechanism | Auction. |
| Auction method | Single-price Dutch auction, competitive bids. |
| Minimum bid amount | 200,000,000 KHR. |
| Auction schedule | Every Thursday (except holiday). |
| Operating process |
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| Result announcement |
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| Settlement |
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| Eligible collateral |
|
| Haircut rate |
|
b. Central Bank Bills
The Negotiable Certificate of Deposit (NCD), a standardized securities with defined maturities, is a central bank bills issued by the National Bank of Cambodia that act as a monetary instrument to absorb liquidity from the banking system and is a financial instrument that is regarded as low-risk collateral. NCD is traded in secondary markets and are highly liquidity. They can be used as collateral for transactions, such as interbank lending or operations with the National Bank of Cambodia, including Liquidity Providing Collateralized Operation (LPCO), Marginal Lending Facility (MLF), and overdraft.
NCD is a financial instrument that is regarded as low-risk asset for private financial institutions
| Purpose | Liquidity absorption. |
|---|---|
| Eligible Counterparties | NBCP members and signed an Agreement on Securities Transactions with NBC. |
| Transaction type | Central bank bill |
| Currency | KHR And USD |
| tenor |
|
| Interest rate and allotment | Announce weekly by auction Committee |
| Mechanism | Auction. |
| Auction method |
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| Value Per Unit |
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| Auction schedule |
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| Operating process | Auction process through NBCP Session open from 8:00am to 11:00am |
| Result announcement | Same day At 2:00PM |
| Settlement |
|
c. Standing Lending Facilities
The Marginal Lending Facility (MLF) is an on-demand facility that provides short-term liquidity needs to financial institutions at the moment of need with a fixed interest rate and has overnight maturity, which can be extended upon request. The MLF supports financial institutions to access and manage liquidity in KHR almost real time for their needs and helps maintaining interest rate stability.
As a private financial institution can borrow from NBC at the rate of MLF, this is regarded as a ceiling rate for interbank money market transactions.
| Purpose | Liquidity providing. |
|---|---|
| Eligible Counterparties | NBCP members that have signed the Repo Master Agreement with NBC. |
| Transaction type | Standing facilities |
| Currency | KHR |
| maturity |
|
| Interest rate | Decided by the Monetary Policy Committee |
| Mechanism | On-demand |
| Minimum Request Amount | No |
| Maximum request amount | Based on collateral value |
| Schedule and frequency of operations | Twice daily | Operating process |
|
| Settlement Maturity | |
| Eligible Collateral |
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| Hair Cut |
|
d. Open Market Operations (OMO)
The NBC conducts open market operations by buying or selling government bonds with market participants in the secondary markets. The NBC currently only transacts with securities that have remaining maturity under 90 days. The operations is conducted in the National Bank of Cambodia Platform (NBCP)
e. Reserve Requirement
Reserve requirements oblige financial institutions to hold a specified portion of their deposits as reserves at the National Bank of Cambodia (NBC). They serve both monetary policy and prudential purposes. As a monetary policy instrument, reserve requirements function as a structural tool that supports liquidity conditions in the banking system and complements market-based operations by influencing banks’ lending and funding behavior over the medium term. To support the use of the Khmer riel, the NBC applies a reserve-requirement averaging framework, which allows financial institutions flexibility in managing their day-to-day Khmer riel liquidity while meeting their reserve obligations over the maintenance period.
f. Foreign Exchange (FX) Intervention
The NBC may conduct foreign exchange interventions by buying or selling foreign currency to maintain orderly conditions and exchange rate volatility in the FX market. These operations are used selectively to address excessive volatility or market disorder that may have implications on domestic conditions.
g. FX Forward and FX Swap Operations (In progress)
The NBC may use FX forward and FX swap transactions to manage short-term foreign currency liquidity and smooth temporary imbalances in the FX market. These instruments involve the exchange of currencies at agreed dates and rates and are used for liquidity management purposes rather than to guarantee exchange rates. These instruments are being prepared to implement.