The first Liquidity-Providing Collateralised Operation (LPCO) scheme was launched by the National Bank of Cambodia (NBC) yesterday, allowing local banks and microfinance institutions to borrow funds in riel at low interest rates to cover their payments and reserve obligations.
The mechanism also gives the central bank indirect control of the Kingdom’s money supply, while moving toward the establishment of a benchmark interest rate.
“We don’t expect to get this [benchmark] rate immediately through the first few LPCOs, because the market will need to adjust and adapt to this new operation,” said NBC director-general Chea Serey. “We hope that over time a rate will stand out clearly. Once this rate is established, NBC can then influence it through our subsequent operations.”
The loans use negotiable certificates of deposit as collateral, a practice the NBC is keen to promote along with a greater adoption of riel currency.
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