National Bank of Cambodia Reports Lending Surge in 2012

Lending by commercial banks in Cambodia grew by more than one-third last year, according to figures provided by the National Bank of Cambodia (NBC) on Thursday.

Concerns over rapid credit growth will be compounded by the figures on the activity in the Cambodian banking sector in 2012, which show that growth in credit was even greater than previously thought.

Banks lent out a total of $5.89 billion in 2012, compared with $4.39 billion in 2011, NBC figures show, meaning that credit growth was a massive 34.2 percent in the year.

The amount of money held in deposits in the banks increased by about a quarter in the same period. Total deposits in 2012 were $6.22 billion, compared with 4.98 billion in 2011.

In January, a report from the International Monetary Fund (IMF) cited figures for 2012 up to September that showed credit growth at 30 percent, which it said was “among the highest in Asia.”

The IMF warned that credit was growing much faster than gross domestic product, and therefore recreating similar conditions to just prior to the boom and then bust in Cambodia’s property sector in 2008.

“Continued rapid credit growth could jeopardize macroeconomic and financial stability, and in­crease contingent fiscal liabilities,” the IMF said.

Stephen Higgins, former chief executive of the ANZ Royal Bank, said it was a concern that lending was growing quicker than deposits.

“If [credit and deposits are at] a ratio of one-to-one, the system is getting very tight, and banks start getting into trouble,” he said, adding that, anecdotally, it appeared there was a “slip of [lending] standards at some banks.”

“That is getting to the point where you really want to start applying the hand break,” he said.

One way of controlling lending is to raise the banks’ reserve re­quirement—the amount of money that banks must keep in reserve and not loan out. The NBC did this in September, raising the requirement from 12 percent to 12.5 percent, with NBC director-general Nguon Sokha saying that it was a “signal” to the banks.

But Mr. Higgins said the raise was “such a small increase that it will have no meaningful impact.”

Ms. Sokha said that the increase would not have tak­en effect in time to make a difference to the 2012 figures.

“The effect should be starting maybe now. We can’t see it in the same year,” she said.

Asked whether the bank would further increase the re­serve requirement, Ms. Sokha said the bank had to “consider several things.

“That’s why I can’t speculate on whether we increase or not.”

In Channy, chief executive of Acleda Bank, said the growth in lending—which was about 24 percent in 2012 for Acleda—was not of concern.

“Most of the loans are for agriculture, in industry, so it’s safe,” he said. “This is productive loans. It goes for services, trade. It won’t go to [property] speculation.”

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