Canadia Bank, the nation’s largest private bank, is continuing its investigation into a former department head who has confessed to misappropriating about $1.5 million of client deposits, the bank’s vice president, Phuong Khinh Hoa, said Monday.
His actiosn will not negatively affect Canadia’s operations or its clients, Phuong Khinh Hoa said, while banking analysts said that, despite the revelation, depositors should feel more secure than ever in the nation’s banks.
Phuong Khinh Hoa said that the former letter of credit department head, Kim Sophea, 40, has promised to return less than half of the money he took. He had placed the money in a friend’s Foreign Trade Bank account to earn interest on it.
“Where did the money go?” Phuong Khinh Hoa said Monday.
A preliminary investigation by the bank and police has revealed that Kim Sophea was entrusted by longtime clients with cash deposits, dating back to 1999, which he then simply deposited in the account of his friend, garment factory manager Phing Sam Reth. It is not known how much interest he earned on the $1.5 million.
Adam Sack, the International Finance Corporation’s general manager in Cambodia, praised the bank’s public investigation.
“I think it is a healthy sign that Canadia can come out and say we will not tolerate embezzling,” he said, adding that the openness should bolster public confidence in banking here rather than erode it.
Sack said that historically, public confidence in banks has been low. But, he said, key reforms have improved the safety of depositing in banks.
“[Depositors] can take comfort by the increased capitalization requirement [for banks] to $13 million and from the relatively high solvency ratio compared to international standards. But this is not the same as a guarantee,” he said.
These standards help ensure that in a risky financial environment such as Cambodia’s there is enough equity on hand to pay clients on demand. When the government raised the capitalization requirement to $13 million in 2000 about 11 banks closed.
But there is not yet a program of deposit insurance in Cambodia. In developed countries, governments often insure bank accounts in the event of bank failure.