THE Singaporean commercial bank VIP announced it would be shutting its doors in Phnom Penh because it cannot meet the government's capital requirement.
The closure is the first since the global credit crunch hit in September of last year.
The National Bank of Cambodia (NBC) increased the minimum capital requirement from US$13 million to $37.5 million in September 2008. The closure is not expected to have a strong impact on the local economy.
Tough competition in the local market and the economic slowdown also played a role in the closure of VIP, said Key Kak, chairman of the accounting firm Morison Kak & Associates, which was authorised by National Bank to liquidate VIP's assets and settle deposits.
"The bank opened in August and closed in December. It had less than a hundred customers," the liquidator said.
"We have three months to clear the assets, repay all deposits and clear customer debts," said Key Kak on Sunday.
In Channy, president and chief executive officer of ACLEDA Bank, said Sunday that the tripling of registered capital requirements was not a serious concern because the NBC has given commercial banks until 2010 to comply.
I THINK THE NBC INCREASED THE REGISTERED CAPITAL TO FAVOUR THE BIG FISH.
He added that the registered capital is not significant for Cambodia's large banks.
"I think that the tripling can help Cambodia's economy in the future. It will not kill the small banks," In Channy said.
Houth Pum, professor of law and economics at the Royal University of Phnom Penh, said Sunday that the capital increase is an obstacle for small banks but would help large banks become stronger.
"For the current size of Cambodia's economy, about ten banks is sufficient, but we have more than 20.
"I think NBC increased the registered capital to favour the big fish in the banking sector so the small fish will die," Houth Pum said.
"Even though there are many banks, the extent of loans and deposits has not increased much because our economy is not large enough."
Officials from VIP and NBC could not be reached for comment on Sunday.
According to NBC figures, Cambodia has 25 commercial banks, six specialised banks and 17 microfinance institutions.
As of October 2008, commercial banks had $2.4 billion in loans outstanding and $2.49 billion in deposits.
NBC raised capital requirements following the onset of the global economic crisis. Its tightening measures also included stricter rules on lending to the property sector.