Depositors Worry About Effect of Bank Closures

She could have used the money to buy dried fish to help feed her family, but instead the 68-year-old Phnom Penh resident who makes clay piggy banks for a living put 100 riel in her savings account each day.

Neighbors of the woman, who is leader of one of 10 wom­en’s groups associated with the local NGO Urban Poor Women Dev­elop­ment, have done the same for the last three years, in hopes that the savings would bring them a better future.

But, they say, their hopes are now gone. Their painful efforts have become moot because of the National Bank’s decision to close down the bank where they deposited their savings, the Agriculture and Commercial Bank of Cambodia.

“Every 100 riel comes from our efforts to sacrifice [something in] our lives, giving up some food or other things,” said the group leader, adding she did not want to be named for fear of alarming her neighbors, who are unaware of the bank’s closure.

Each of the more than 400 families belonging to the UPWD’s 10 community groups have deposited 100 riel or 200 riel per day into savings accounts since 1997. Their savings accounts now total about $4,500.

“We are hopeless,” said the group leader, who lives in a squatter community. “They destroyed our future and our confidence in savings.”

The closed bank was one of 11 commercial banks shut down Friday because they failed to meet requirements established under the new banking law. The law now requires all commercial banks operating in Cambodia to increase their capital to a minimum of $13 million, up from $5 million. The central bank has issued a new banking license to only four of the 31 existing commercial banks.

The Agriculture and Commer­cial Bank has more depositors than any other bank closed by the central bank, according to Senaka Fernando, a manager at the business consultant agency PriceWaterhouseCoopers. The majority of the closed banks have not been operating for years, he said.

Since the closure, many angry depositors have gathered in front of the Agriculture and Commer­cial Bank. But the bank has only guards standing in front of a closed gate and none of the bank staff have come out of the building to give an explanation to depositors.

Repeated attempts to reach the bank’s management by reporters also failed.

The Urban Sector Group, an NGO that encourages poor city residents to save money, also used the Agriculture and Com­mer­cial Bank, according to Lim Phai, director of the organization. The city residents deposited a total of $5,200 at the bank.

Lim Phai said many NGOs involved in small savings activities have used Agriculture and Com­m­ercial Bank because it accepted savings in riel, in addition to US dollars.

“We had only little knowledge on the banking law and what is going on with the banking sector because the government hasn’t publicized it well,” said Lim Phai. “We’re afraid that we can not recover our deposits.”

NGOs that have their own accounts at the bank and other everyday residents are also questioning what will happen to their money.

The Cambodian Labor Org­anization opened their account at Agriculture and Commercial Bank, and now the group doesn’t even have enough money to pay staff salaries, said Seng Phally, CLO’s executive director. And one of CLO’s district offices is now facing eviction because it cannot pay the electricity bill.

“We can not operate our programs now,” said Seng Phally, adding all the funds for CLO’s operating costs are kept in the bank. “Who is responsible for this? We have to complain to the National Bank’s governor.”

Officials of the central bank said that all the failed banks are now selecting administrators and liquidators who are evaluating assets and liability. After the audit, which is expected to finish within a month, each bank will recover loans and repay money to depositors in accordance with the law, officials said.

“I cannot say how liquidation will go and if depositors can recover all the deposits,” said Tal Nai Im, the central bank’s director-general. “It’s the job of liquidators, not the central bank.”

Customers of Agriculture and Commercial Bank plan to meet Saturday at the NGO Padex to discuss legal action.

 

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