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Local Banks at Risk, Top Institutes Warn

The World Bank and International Monetary Fund both warn that three of Cambodia’s nine largest banks are at risk of succumbing to the global financial crisis and a national recession.

Neither institution will name the banks in question, but both say new economic conditions in global finance have weakened Cambodia’s highly dollarized banking system.

Cambodia’s banks are at risk from a liquidity shortage, the slowdown of deposit growth and a rise in non-performing loans.

Since September 2008, shortly after the global financial crisis, bank deposit growth slowed significantly, turning negative, the report says, while large withdrawals have reportedly been made by firms concentrated in the property sector.

John Nelmes, IMF’s representative in Cambodia, told VOA Khmer in an interview Thursday that several of Cambodia’s banks are at risk. The banks are among the country’s nine largest, which together control nearly 90 percent of deposits.

“The risk in the banking system is now higher than previously,” Nelmes said. “The banking system is coming under increasing strain.”

The World Bank’s report shows similar concerns.

The report, received by VOA Khmer on Thursday, points out that growth in credit has been largely directed at consumption, working capital and real estate, but less at fixed investment.

“The rapid growth of credit for real estate development and construction represents even more risks,” the World Bank report says. “A fall in property prices could create problems for the involved banks, some of which already have high NPLs [non-performing loans].”

“The concentration of NPLs in two banks is also a major concern,” the report warns, without naming the banks.

“Our recent report indicated our general concern about non-performing loans in the financial sector,” Stephane Gimberk, senior economist expert of the World Bank, told VOA by email. “We feel it is critical for the central bank to deepen its efforts at bank supervision.”

Tal Nay Im, Director of the National Bank of Cambodia, agreed with the concern. But she claimed that the central bank has been paying much attention to all financial institutions. She said she was optimistic that Cambodia’s banks are in a good standing.

Some of Cambodia’s top banking executives say they remain in good shape.

Acleda CEO In Channy, ANZ Royal CEO Stephen Higgin and Canadia Bank Vice President Chhor Vann all claimed their banks were stable.