Indosuez May Hand Local Operations to Foreign Trade Bank

Credit Agricole Indosuez and the National Bank of Cambodia announced Tuesday that they had signed an agreement to study the possibility of the state-owned Foreign Trade Bank ab­sorbing the operations of Credit Agricole Indosuez.

The move fueled speculation that Indosuez will pull its operations from Cambodia as part of a downscaling the bank has undergone in other Asian countries.

Indosuez issued the following statement Tuesday: “The Na­tional Bank of Cambodia informs that a memorandum of understanding was signed on March 14, 2002, between the Foreign Trade Bank of Cambodia and Credit Agricole Indosuez in order to study the transfer of the activities of CAI Cambodia Branch to FTB.”

“It means [Credit Agricole Indosuez] will be taken over by the Foreign Trade Bank,” said Tal Nai Im, director-general of the National Bank.

“The operation has not yet be­gun,” she said, but the Foreign Trade Bank will “study the assets and liabilities” of Indosuez, then eventually absorb the bank’s op­erations.

The Indosuez name would disappear from Cambodia “when the operation succeeds,” she said.

There was no elaboration from Credit Agricole Indosuez officials.

Financial observers have been speculating for months that Cred­it Agricole Indosuez would close its local operations.

The Phnom Penh branch has remained silent on the issue.

Credit Agricole Indosuez has al­ready reduced its operations in Singapore, closing a regional bro­ke­rage and “exiting from re­search brokerage activities in most of Asia,” the Singapore Times reported in November.

The bank has reduced its Asian staff by as much as 350, with cuts in countries including Hong Kong, South Korea and Taiwan, the newspaper reported.

The Credit Agricole Indosuez announcement came on the same day the National Bank said it had entered the last stage in its lengthy bank relicensing process.

According to a statement from the National Bank, First Overseas Bank and Singapore Commercial Bank will be liquidated, having failed to raise the required $13 million in registered capital to be placed on deposit with the Na­tional Bank. A total of 19 banks remain, in­cluding Standard Chartered, which is “in the pro­cess of being downgraded to a representative of­fice,” according to the National Bank statement.

Financial analysts and bankers said Tuesday completion of the relicensing would produce an upswing in public confidence in the central bank, which has  used technical assistance from the In­ter­national Monetary Fund to mend a battered banking sector.

Analysts said that despite the downgrading by Standard Char­tered and the changes at Credit Agricole Indosuez, the banking sector will be more robust than be­fore relicensing began.

“It will certainly increase the public knowledge,” said Senaka Fernando, an economist at Price­WaterhouseCoopers. The public can now see which banks are “seriously” conducting banking op­­erations, Fernando said.

The Khmer Rouge abolished the banking system in 1975, and when it resumed it was organized as a strict central banking system.

Current efforts are aimed at developing both commercial banks and tighter regulation.

A banking law passed in 1999 led to the almost immediate closing and liquidation of 11 banks. Many customers lost at least some of their deposits, and the liquidations further hurt the im­age of banks in a country where gold and livestock are still widely accepted means of savings.

The commercial banks that have met recapitalization requirements are the Cambodia Com­mercial Bank, Cambodia Public Bank, Cambodia Asia Bank, Can­adia Bank, Krung Thai Bank Publ­ic Co, Credit Agricole Indo­suez, the Foreign Trade Bank of Cambodia, First Commercial Bank, Cambodia Mekong Bank, Maybank, Singapore Banking Corporation, Standard Chartered, Un­ion Commercial Bank, Ad­vanced Bank of Asia and Em­peror International Bank.

There are  now four licensed “specialized banks” whose capital re­­quirements are lower, but who by law cannot provide as many com­mercial services as the other banks. They are Cambodia Agri­cul­ture Industrial Specialized Bank, the Rural Development Bank, Acleda Bank and Peng Heng SME Bank.

UK-based Standard Chartered announced earlier this month it was ceasing operations in Cam­bodia due to an international re­structuring of the bank in the face of a weakening global economy.

Analysts say Standard Char­tered’s move did not mean customers would not recover their deposits.