Fear of Depositor Panic Fuels Inaction
Fearing public panic at worst and a blow to depositor confidence at best, the National Bank of Cambodia has failed to enforce a Dec 31 deadline for banks either to meet higher capital requirements or close.
Under memoranda of understanding signed in 2000 between individual commercial banks and the National Bank, each bank was to deposit a minimum of $13 million in the National Bank in order to be licensed in Cambodia.
But the status of some of those banks remains “a secret,” said Phan Ho, director of banking supervision at the National Bank, who said he needed more time to “solve the banking problem.”
The 1999 law on banking led to the closing of 11 out of 31 banks in Cambodia and disaster for many depositors who are still trying to recover their money from some of those banks. Four banks have received licenses, and the remaining 16 were issued provisional licenses by the National Bank.
According to a Nov 30, 2001, document from the National Bank, 18 commercial banks were still operating under full or provisional licenses.
Many of the banks on that list are still in operation, but most bank executives declined comment, referring all questions concerning their licenses to the National Bank of Cambodia.
Based on interviews conducted over the last two weeks, the following banks have received their licenses by meeting the minimum capital requirements: The Foreign Trade Bank of Cambodia, First Commercial Bank, Krung Thai Bank, May Bank, Standard Chartered Bank, Canadia Bank and Cambodian Public Bank.
The status of the remaining 11 banks was unclear Wednesday: Credit Agricole Indosuez, the Advanced of Asia Bank, Cambodia Agriculture Industrial and Merchant Bank, Cambodia Asia Bank, Cambodian Commercial Bank, Cambodia Mekong Bank, Emperor International Bank, First Overseas Bank, Singapore Banking Corporation, Singapore Commercial Bank and Union Commercial Bank.
Of those 11, some may have recapitalized and others may be operating under extensions issued by the National Bank. All of them confirmed they were in operation except for the Cambodia Agriculture Industrial and Merchant and Cambodia Asia banks. Telephone calls made to Cambodia Agriculture Industrial and Merchant this week went unanswered. The listed number for Cambodia Asia had been disconnected.
The future of Credit Agricole Indosuez, the only foreign branch bank without a license, lies in the hands of its executives in France.
A spokeswoman for Credit Agricole Indosuez general manager Bernard Padigon declined further comment.
One of the government’s main development projects under International Monetary Fund guidelines is to clean up the banking sector and restore depositor and investor confidence.
Many Cambodians still rely on alternative forms of banking, from high-interest personal loans to jewelry investment to livestock purchases.
Phan Ho refused to discuss the 11 banks still in question. He would not say if they had deposited the $13 million, or whether they were being allowed to stay open because of a deadline extension.
“It’s a secret,” he said. “It’s still confidential for the public.”
His main concern was that depositors would rush to those banks and withdraw all their money, possibly bankrupting them.
“I cannot tell you” which banks have met the capital requirements, he said, adding he had “no idea” when the information would be available.
One bank executive, who asked not to be named, said the newly created Association of Banks of Cambodia had decided not to talk the press for fear of a “run on the banks.”
“It’s a sensitive issue,” he said.
The association’s president, Khov Boun Chhay, who is the head of the Mekong Bank and the son of Cambodian business tycoon Teng Bunma, was unavailable for comment.
“Everybody is open,” said Teth Charath, an executive at First Overseas Bank. “If you want more information, it’s better [if] you talk to the National Bank.”
Tal Nai Im, director-general of the National Bank, referred questions to Phan Ho. National Bank Governor Chea Chanto could not be reached for comment and did not respond to a written request for an interview.
Royal Group Chairman Kith Meng, head of a government-private sector working group on banking, said the National Bank had done a good job so far of restoring people’s confidence in the banks.
“What the National Bank has done is good for the country,” he said. “The banks need to make sure they have the confidence of the public.”
Kith Meng said it was likely that individual banks have made extension agreements with the National Bank. He said he doubts if any of those agreements are for more than six months.
“I don’t think the National Bank will give them another year,” he said.