Canadia Bank Continues Probe of Former Official

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.

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