Bad Loans on the Rise, Central Bank Warns

Tal Nay Im (Center) (Photo: Sovannara, RFI)

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
07 September 2009

Cambodia’s banking sector will not be able to avoid further consequences from the global economic downturn, with non-performing loans increasing, the National Bank’s director- told a workshop last week.

“For us, the economic crisis affected garment export, tourism, construction and real estate,” said Director-General Tal Nay Im said at a workshop on the nation’s banking system. “So the banks’ borrowers are facing a hard time paying back [loans] when they can’t earn from their businesses. That will cause [non-performing loans] to increase, and that’s a second-round affect that the national bank is worried about.”

The National Bank reported in June bad loans in 24 commercial banks had risen to 3.7 percent, about $2.4 billion, in 2008, up from 3.4 percent the year before.

But Tal Nay Im said the news was even worse through May, 2009, when non-performing loan figures reached 5.2 percent. The rate could reach as high as 10 percent by the end of the year, she warned.

The Foreign Trade Bank’s bad loan rate went from 30.7 percent in 2007 to 32 percent in 2008. Canadia Bank saw its number rise from 6.8 percent to 11.1 percent in that period. ANZ Royal Bank saw an increase from 0.4 percent to 2.6 percent in that period.

The National Bank report echoed annual reports of the International Monetary Fund and the World Bank, which warned of rising rates of non-performing loans in major banks.

Credit disbursement has also slowed, from a growth rate of 50 percent in 2008 to just 1 percent through the middle of this year.

“The banking systems are under threat,” Robert van Zwieten, director of the capital markets and financial sectors division for the Asian Development Bank, told VOA Khmer in a phone interview from his office in Singapore. “Marginally speaking, it is slightly weaker than it used to be. That’s what you would expect and that is not certainly usual.”

Van Zwieten said economic recovery will increase loan disbursement and lower the rate of bad loans. Meanwhile, the National Bank can play a key role, keeping an eye on banking operations, while banks themselves should be more careful in providing loans.

“Our bank works with big companies, and we have collateral,” said Gui Anvanith, managing director of the Foreign Trade Bank, which has the highest rate of non-performing loans in the country. “We will continue to be cautious and to strengthen the banking system.”

Tal Nay Im said the National Bank had followed up on an international evaluation to improve regulation and supervision.

Public confidence in Cambodian banks is growing

PHNOM PENH, Aug. 27 (Xinhua) -- Public confidence in Cambodia's banking sector is growing and has managed to withstand the onslaught from the global economic crisis, local media reported on Thursday, quoting the director general of the National Bank of Cambodia (NBC).

While speaking at a roundtable discussion on banks and public confidence, which was organized by the Club of Cambodian Journalists, Nai Im, director general of the NBC, was quoted by the Cambodia Daily as saying that bank deposits had increased to almost 29 percent of gross domestic product in 2008, up from just 14 percent in 2000.

"The public confidence in the banking sector and financial system is reflected through the increase in deposits, credit and total assets of the banking sector," she said.

Though banks worldwide have declared massive losses as a result of the global economic crisis, total bank assets in Cambodia increased 21 percent to more than 4.2 billion U.S. dollars in 2008and loans increased by a third to 2.4 billion U.S. dollars, according to the National Bank's annual report released last week.

Deposits, however, were hit hardest, increasing only four percent to more than six billion U.S. dollars in 2008, compared to75 percent growth in 2007.

"Although the Cambodian economy is free and open to the rest of the world, the Cambodian banking system did not directly suffer from the consequences of the financial crisis," Nai Im said.

Central Bank Offers Loans to Boost Liquidity

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
01 April 2009

Cambodia’s national bank has announced short-term loans for local banks and financial institutions that are facing liquidity constraints in the wake of the financial crisis.

A Jan. 20 directive obtained by VOA Khmer last week warns that “unforeseen or unprecedented adverse trends or market conditions” could mean that standard risk management might not suffice for some institutions, the National Bank directive says.

“Considering the risk, the NBC is considering granting overdraft facilities aimed at helping such institutions overcome temporary liquidity shortages,” the directive says.

The International Monetary Fund and World Bank have both warned that a number of Cambodia’s banks are facing liquidity problems, thanks to non-performing loans and a slowdown in deposits.

Any institution asking for the loans must be profitable, solvent and have collateral. The loans would have to be paid back within three months.

Officials from the Ministry of Economy and Finance say the NBC has prepared $100 million for lending, though requests for such loans cannot exceed 50 percent of a bank’s reserve requirements. (All commercial banks keep a reserve of 12 percent of deposits at the central bank.)

“The National Bank has already finalized a policy for banks that want to request [the loans],” Finance Minister Keat Chhon told reporters last week.

So far, none of Cambodia’s 47 institutions has applied for the loans, Keat Chhon said.

“The National Bank is taking measures by providing these loans, meaning that there is an effect on the banking sector, which could face a crisis,” Chheang Meng Heak, an economist at the Royal University of Law and Economics said. “This package will help ease tensions among investors, by demonstrating that we have enough funding to prevent unforeseen crises.”

He cautioned, however, that the loan package was just a short-term solution to help financial institutions. Some of these may still face problems if the real estate sector, a major lending target for Cambodia’s banks, slumps further.

CPP Chea Chanto: Cambodia would create favourable conditions for Hun Sen's Viet bosses to open bank branches in the Cambodia

PM welcomes Cambodian bank governor

December 19, 2008

Nhan Dan – Prime Minister Nguyen Tan Dung on December 18 received the visiting National Bank of Cambodia (NBC) delegation led by Governor Chea Chanto.

Governor Chea Chanto said that the relations between the State Bank of Vietnam (SBV) and the NBC have seen ever more progress on the basis of the two countries’ traditional friendly co-operation.

He informed PM Dung that during his visit to Vietnam, the two central banks exchanged views on the economic situation in their respective countries and on their activities in the areas of monetary policy, inspections and operation of credit organisations. Two sides signed a memorandum of understanding on the exchange of information regarding banking inspections to create a legal foundation for stricter management in order to help the two countries’ commercial banks operate in a safer and more secure manner in the context of international competition and integration.

Governor Chanto affirmed that the Cambodian authorities would create favourable conditions for the Vietnamese commercial banks to open their branches in the Cambodia.

PM Dung highly appreciated the co-operation between SBV and NBC, particularly the agreement signed during Governor Chea Chanto’s working visit.

He said that the Vietnamese Government and people would do their utmost to boost the friendly, co-operative and neighbourly relations between Vietnam and Cambodia in the interests of their people.

According to PM Dung, Cambodia’s recent granting of licences to two Vietnamese banks to open their branches in the country will help increase the two countries’ trade value to US$2 billion by 2010 and encourage Vietnamese businesses to invest in Cambodia.

Cambodian National Bank predicts 20 pct inflation for 2008 [... this is just the official inflation rate ... in reality it may be even much higher!]

18/8/2008
Xinhua

The National Bank of Cambodia (NBC) has predicted annual inflation could rise to 20 percent this year, substantially less than earlier in the year, local newspaper the Mekong Times reported today.

NBC Governor Chea Chanto was quoted as saying that "the annual inflation rate may stand at 20 percent owing to the effectiveness of the package of measures though the inflation rate rose to a remarkable level early this year."

He did not reveal how high inflation was earlier in the year, saying only that price rises were driven by global problems, including a mortgage crisis, the depreciation of the US dollars, the slowing of the US economy, rising oil prices, regional natural disasters and insufficient harvest.

The NBC has strengthened macroeconomic stability for sustainable economic development, Chea Chanto claimed.

Though growth dropped slightly and has been affected by outside factors, the exchange rate of the riel and value is stable compared to the US dollar, he said.