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Reserve rate doesn’t worry local banks

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Traffic passes the National Bank of Cambodia in Phnom Penh. Photograph: Sovan Philong/Phnom Penh Post

Bankers have raised no concerns over the National Bank of Cambodia’s increase to the reserve requirement rate in order to maintain the stabilisation of cash flow and inflation during a time of global financial difficulty.

The increase, from 12 to 12.5 per cent, issued late last month, was in line with the IMF’s revised world economic outlook from 3.3 per cent and 3.6 per cent in 2012 and 2013 respectively.  

Jang Ki-Sung, the chief executive and president of Kookmin Bank in Cambodia, welcomed the increase, saying it was in step with the global financial situation, especially in European countries.

“Actually, it [the increase] should be related to the current situation of the global economy as you see the financial situation in the European countries and the slowdown of economic growth in China as well,” Jang said.

“It is very fragile, and I don’t know the risk to the financial market. Maybe the central bank is trying to insure against any disaster from foreign countries, and that’s why they are changing the reserve requirement rate.  

“I think the purpose of increasing the reserve requirement rate is to control the cash flow in the financial market share and to control the rate of inflation.

“It is not a concern for us because it is very small and it does not make any objections for our operations here — I don’t have any problem with that.”  

In Channy, the president and chief executive of Acleda Bank, also expressed his support for the National Bank’s reaction to the situation.

“It is a prudent measure by the NBC. It is an appropriate action, as they are the regulator because it is relevant to the inflation rate. When the money is largely disbursed, it will push the increase of inflation,” Channy said.

Charles Van, president of the Association of Banking of Cambodia (ABC), said he would have a meeting with association members next week about the issue.

Van said the National Bank had doubled the rate in 2008 during the global financial crisis from eight to 16 per cent, pointing to the latest  increase as of no concern.

“It is pretty small, so we are not worried. We will still keep growing as our plan,” he said.

National Bank director-general Ngoun Sokha said last week the action aimed to strengthen the country’s monetary policy.

“This is the implementation of monetary policy to tell the banks that the authorities are really concetrating on the fast growth of loans,” she said.

“We want it to increase in a manageable way. The increased reserve requirement rate is a signal to the banking industry to enhance their loan quality. It’s not putting more burden on the banks.”

National Bank of Cambodia data shows that at the end of June this year, outstanding loans at the kingdom’s 32 commercial banks totalled $4.92 billion, compared with $3.75 billion in the corresponding period last year — a rise of 31.2 per cent.

To contact the reporter on this story: May Kunmakara at kunmakara.may@phnompenhpost.com

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