The National Bank of Cambodia has asked shareholders of First Overseas Bank, Ltd to gather the money required to pay off its depositors, after the bank failed to meet the recapitalization standards outlined in a new financial law, officials said Wednesday.
The bank has not yet been asked to liquidate its assets, but its shareholders will have to gather the money “soon,” National Bank Director Tal Nai Im said.
“We asked the shareholders to inject the money to pay the depositors,” Tal Nai Im said Wednesday. “If they cannot do it we are going to ask them to liquidate.”
First Overseas director Bernard Lee was out of town Tuesday and Wednesday. A spokesman for the bank declined comment on the bank’s operations, referring all questions to the National Bank.
However, a Siem Reap employee confirmed by phone Tuesday the bank would continue its recently announced $500 ceiling on withdrawals until next month. The ceiling caused some concern among bank observers that depositors would panic and start a run on the bank.
A Phnom Penh banking official said the First Overseas branch in Phnom Penh was closed Saturday and Monday and bank representatives had not attended a weekly meeting of bankers on Tuesday. The Phnom Penh branch has now reopened.
The director of a Phnom Penh business employing 44 people said Wednesday at least two staff members had not been allowed to withdraw money from the bank. One staffer was refused when he tried to cash a $2,000 check at the bank. Another was given just $100 when he tried to cash a $500 check.
The director said he was “not confident at this stage” his business would be able to retrieve all the money they had deposited in First Overseas.
“Considering what happened last year, we have to be concerned,” he said.
The sudden closure of several banks in December 2000 cost many depositors to lose much of their savings, when the banks were unable to cover the total amount held by depositors.
In a December 2001 letter to the International Monetary Fund, which is pushing the government to reform its financial sector, Minister of Finance Keat Chhon and National Bank Governor Chea Chanto wrote the bank restructuring was progressing as planned.
“Three banks have not made satisfactory progress and are likely to be closed with liquidation procedures initiated in early 2002,” the two wrote in their report to the IMF.
Banking experts were hesitant to speculate on the identity of the other banks, but said a formal announcement from the National Bank was expected by the end of the month.
First Overseas would be the first bank to close in 2002 under new banking laws requiring a greater amount of capital registered with the National Bank. The 1999 law required banks to increase their reserve capital from $8 million to $13 million.
Eleven banks quickly closed. Sixteen banks were issued provisional licenses, which were to expire Dec 31, 2001 under an agreement with the National Bank.
However, the National Bank, saying they were willing to give banks more time to recapitalize, did not enforce the deadline. The future of some banks remain unclear, and bank executives have been reluctant to discuss the status of their banks.