The new governor of the National Bank of Cambodia will inherit a legacy of financial scandals from his predecessor, Thor Peng Leath, who officially resigned from the post last week, observers and officials say.
Chea Chanto also will have to apply a firm hand to keep inflation under control and resist borrowing pressures from the government in the run up to the election, they say.
Thor Peng Leath has been credited with expanding the commercial banking sector in Cambodia but he failed to implement the proper checks required, one long-term foreign observer noted.
“His time as governor saw a mushrooming of the commercial banking sector but the regulations were not in place,” the observer said. “Licenses were being awarded when the banks were not meeting the necessary criteria.”
One scandal to rock the National Bank involved irregularities in granting a license to the Credit Bank of Cambodia, which was closed in 1995 for violating banking legislation.
Documents obtained by The Cambodia Daily at the time showed that senior bank officials signed an agreement allowing the Credit Bank to borrow from government funds in order to meet the capital requirements for establishing a new bank.
The documents said the $3 million loan would stand “in place of the capital reserves needed to open a Cambodian bank.”
The National Bank is not allowed to lend money for commercial projects, according to Tioulong Saumura, deputy governor of the bank until November 1995, when she resigned amid frustrations over failure to modernize the bank.
She believes that Thor Peng Leath did not resign but that he was retired by a government impatient with a series of financial scandals.
“He was incompetent. He was just a clerical accountant,” she said of her former boss. “He had no knowledge of monetary policy or finance. When we negotiated with the [International Monetary Fund] he never opened his mouth, because he knew nothing.”
Secretary of State for Information Khieu Kanharith said Thor Peng Leath left his post because he was having problems with staff. A protest last October blamed the governor for possible job losses.
“He doesn’t want to tarnish his name any more,” Khieu Kanharith said. He would not comment on whether the former governor was asked to resign.
Attempts to reach Thor Peng Leath were not successful Monday.
The new governor, Chea Chanto, the minister of planning since 1986, does have banking experience. He is a loyal CPP supporter who was appointed deputy director of the national bank in the 1980s under the then-communist government.
But running a bank in a market economy may challenge his economic ideological background, the foreign financial observer said.
“Like everyone else in the government, he will learn quickly,” the observer said. “However, with the country going into the elections there will be a lot of pressures on the budget to spend so we’ll see how those pressures will be handled.”
