NBC Plans Second LPCO Bid

KHMER TIMES
SOK CHAN



The National Bank of Cambodia (NBC) will increase the frequency of fresh supply of local currency, following last week’s successful release of some 40 billion riel (about $10 million) by the central bank to microfinance institutions (MFIs) and commercial banks at three percent interest in the inaugural bidding of the new Liquidity-Provided Collateralized Operation (LPCO).

According to an NBC statement released yesterday, the LPCO bidding will now be made every month, within a six-month period.

The announcement for the second LPCO bidding will be made on November 22 and it will be based on the Dutch auction system, added the statement. The NBC also clarified that the amount of riel to be released and the interest rate would be confirmed a week in advance before each monthly bidding.

A Dutch auction is a public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold. In this type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.

Last week, the NBC released close to 40 billion riel to MFIs and banks at three percent interest in the first part of the LPCO.

The NBC, in a statement said the money was released to an undisclosed number of MFIs and commercial banks who bid, with the largest bid being about eight billion riel (about $2 million) and the smallest about 200 million riel (about $50,000). The operation is intended to boost the liquidity of riel in Cambodia.

NBC director-general Chea Serey recently explained that the LPCO was intended to establish a benchmark rate from which to promote the use of riel in transactions and hopefully contribute to lowering the current high interest rates.

“Through this instrument, [the NBC] hopes that it will influence the interest rate in the market since the NBC will issue riel to MFIs and commercial banks for their lending operations [and]...if it is successful, it will add convenience to managing the Cambodian banking sector,” Ms. Chea Serey said.