Despite a court injunction ordering it to temporarily cease its operations, the Singapore Banking Corporation is open for business—with the blessing of the National Bank of Cambodia.
The Sept 12 injunction stems from a suit that some of the bank’s shareholders brought to the Phnom Penh Municipal Court after what both sides describe as an internal dispute could not be resolved.
The shareholders filed the suit against another group of shareholders, claiming the bank did not properly disclose important information about its activities.
It comes at a time when many commercial banks in Cambodia have closed after failing to meet government capital requirements, causing investors to lose money and damaging consumer confidence in the banking sector.
“The directors and shareholders of Singapore Banking Corporation Limited who form the Plaintiffs in the suit, have been, for some time now, unlawfully excluded by the Defendants from their duties and rights of governance and supervision of Singapore Banking Corporation Limited,” the shareholders said in a written statement.
“This bank cannot be closed because the bank is OK,” said Phan Ho, director of Banking Supervision of the National Bank of Cambodia. “The bank has complied with regulations. The court has no evidence to close the bank. [The bank] has been in compliance for many months now. This is an internal problem. A problem between shareholders.”
Phan Ho acknowledged that SBC was late in complying with the central bank’s re-capitalization requirement, but said the bank had since raised the capital.
He said the bank should be given leeway, in order to preserve customers’ confidence in the bank and the banking system.
A banking law passed by the National Assembly in November 2000 requires all commercial banks to be relicensed and registered with the National Bank. In order to be relicensed, each bank is required to have a minimum of 50 billion riel, or $13 million, in capital and deposit 10 percent of the capital into the National Bank of Cambodia.
“If the court closes this bank, then the depositors will want their money. It will be a loss of confidence in the public,” Phan Ho said.
The National Bank sent a letter to Municipal Court Judge Horm Meng Se on Thursday urging the court to rethink its decision.
“The bank account closure is badly affecting the customers’ confidence, it not only affects the SBC, but also the whole banking system,” the letter said.
Ow Soon Wing, vice president of SBC, repeated that the dispute was an internal issue and said that the “disgruntled shareholders” were only trying to further their own ends by bringing action against the bank. He said the bank was in compliance with all regulations and had enough cash on hand to repay its depositors.
“After restructuring, [the NBC] is very happy with the bank’s results,” Ow Soon Wing said.
The shareholders’ complaint to the court hinges, partly, on an outside audit by the KPMG auditing firm for the year ending on Dec 31, 2001.
All commercial banks in Cambodia are subject to an audit each year, to be reviewed by the NBC.
Claiming they were kept in the dark regarding infusions of capital, the shareholders stated they “are unable to form an opinion that the financial statements appearing in the audit form a true and fair view of the financial position of” SBC.
“There have also been allegations of fraudulent or false mortgage documents being created to satisfy the relevant authorities,” the shareholders said.
Ow Soon Wing said that the Kun family, who runs the bank, put up the extra cash and that the “disgruntled” shareholders don’t know where it came from because they had chosen to disassociate themselves from the affairs of the bank.
Chhun Vinita, a lawyer for the Cambodian Bar Association who is representing the complainants in their suit, said the bank has broken its contract with the complainants, and that is why the lawsuit has been brought to the court.
But Chhun Vinita said that the injunction was only temporary in order to “postpone temporarily [the business of the bank] so that both sides can negotiate.” He added that the majority shareholders “did not properly report about their business.”
In April, the National Bank of Cambodia ordered an audit of SBC by PriceWaterhouseCoopers. The audit was ordered, National Bank of Cambodia Director Tal Nai Im said, because of “some dispute between shareholders.”
Tal Nai Im confirmed Thursday that the audit was completed and the results were satisfactory, although he would not elaborate. Ow Soon Wing also said that the National Bank of Cambodia was satisfied with the audit, but said SBC officials have not seen it.