Cambodia's large commercial banks have begun
competing with each other by raising deposit rates, with the annual rate at several banks rising to 8 percent in November, a record high.
Experts say the
annual deposit rate was as low as 5 percent prior to the global financial
crisis, which saw a tightening of credit among lenders in the wake of a
sub-prime mortgage collapse in the US.
capital from outside lenders, commercial banks are seeking to bring in more
local capital, experts say.
"To avoid the
financial crisis, we have to increase our local deposits," said Phan Soneary,
vice president and executive director of Acleda Bank. "Not only can [the
capital from deposits] support loans, but also other missions of the bank."
Foreign lenders have
restricted their loans, while the number of new depositors has fallen, she
said. Acleda recently raised its annual deposit rate 1 percent, to 7.5 percent.
such as ANZ Royal, Cambodia Public and Canadia have also increased their
deposit rates, to 8 percent annually.
It is not uncommon
for banks to adjust their rates up or down, said Pal Nay Im, general director
of the National Bank, but currently banks have to make themselves stronger.
The deposit rates
are climbing, but annual interest rates on loans remain between 12 percent and
The increase of
local deposit rates is the only way to help banks extend their capital when
foreign partners are reluctant to provide loans, said Chheang Meng Heak,
banking and finance expert at the Royal University of Law and Economics.
"Foreign lenders aren't
offering any loans now, because they are worried about lacking their own cash,"
he said. "They do that just because they are concerned that their financial
system could face a crisis."
However, Oung Ming
Tech, deputy director-general of Cambodia Public, said his bank was not facing
a financial problem, because it depends wholly on its parent bank in Malaysia.
Cambodia Public had increased its deposit rate to maintain local customers, he
"You have to look at
market demand. It is a very competitive market," he said. "We have increased
the rate so that we can get more money deposits. If not, we will lose our
Cambodians deposited money in local banks in the first six months of 2008, an
increase of 12 percent over the same period the year before, according to the
continuing worldwide financial crunch will likely reduce the number of
depositors, said economist Kaong Chandararoth, head of the Cambodia Institute of
Banks who cannot
compete with the rising deposit rates will be forced to close, he said.
Jeremy Ha, director
of Phnom Penh Commercial, said his bank would not be able to follow the rates
of the larger banks.
"As a new bank, we
have tried to attract new customers, but we have no plan to increase the
deposit rate because we cannot do like other large banks," he said. "I am also
worried about this problem."
Other small banks,
however, said they were preparing to increase their deposit rates as much as
they could—and hoping the world's financial woes soon will pass.