Prakas on the Requirements on Financial Soundness of Trust Companies

On 11 March 2025, the Non-Bank Financial Services Authority (NBFSA) issued a new Prakas No. 026 on the Requirements on Financial Soundness of Trust Companies (“Prakas 026“). Prakas 026 sets out the requirements and procedures for the examination of financial soundness of licensed trust companies in the Kingdom of Cambodia.

This Update sets out a high-level summary of the key requirements outlined under Prakas 026.

1. Financial Requirements

A trust company shall prepare its financial statements in accordance with the accounting standards and relevant regulations, and shall at all times:

• Maintain its shareholder’s equity of not less than the minimum capital requirement as stated in Prakas No. 003 on Rules of Management, Organization, Functioning of Trust dated 26 January 2022 (“Prakas 003“).

• Maintain the required security deposit as set out in Prakas 003, which may not be further used as security except as otherwise approved by the Trust Regulator (“TR“).

• Maintain its net capital ratio of not less than 150% based on the following formulas (further breakdowns may be referred to under Prakas 026):

Net capital ratio = Operational net capital​ / Gross risk

(Operation net capital = Total short-term assets – Total liability and Gross risk = Market risk + Credit risk + Operational risk)

2. Reporting Requirements

A trust company is required to submit the following monthly reports to the TR:

• Summary trial balance report; and
• Liquidity report (in a form as determined by the TR).

3. Urgent Corrective Measures

In the event that a trust company cannot maintain the required net capital ratio, the TR will accordingly issue recommendations, requirements, or orders to improve business management, prompting urgent corrective measures, depending on the severity of the inadequacy. Thereafter, the trust company is required to prepare and submit a management improvement plan (mirroring the TR’s recommendations, requirements, or orders) for the TR’s approval and implement the approved plan within designated timelines.

Depending on the shortfall of the net capital ratio, urgent corrective measures that may be required by the TR may include:

• An immediate cessation or reduction of high-risk financial trading activities or financing activities;
• A carrying-on of business operation in accordance with conditions determined by the TR;
• A restriction on the possession of high-risk assets and the sale or exchange of assets;
• The closing and consolidation of business offices or restrictions on the opening of new business offices;
• Requirements relating to change of staff;
• Measures to strengthen human resources and institutional management;
• Reductions of expenses; and/or
• A restriction on activities that lead to the deterioration of net capital ratio.

4. Sanctions

Trust companies that do not comply with Prakas 026 shall be subject to the following administrative measures:

• A warning;
• A correction order;
• Public mentioning and correction orders;
• A restriction on the disposal, management, and/or safeguard of trust property;
• A restriction on licence/authorisation;
• A suspension of licence/authorisation; and/or
• A withdrawal of licence/authorisation.

If you have any queries on the above, please feel free to contact our team members who will be happy to assist.