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Logo of Phnom Penh Post newspaper Phnom Penh Post - Bank to close after $5m loss

Bank to close after $5m loss

A SECOND bank is shutting down after its owners lost $5 million in just four

years.

National Bank Deputy Governor Tioulong Saumura confirmed the

impending closure - though the bank was not named - saying: "I am sure that with

a massage parlour they would have made $5 million in four years."

Five

million dollars is the minimum capitalization required for a bank in

Cambodia.

National Bank officials said that the owners of a small bank

had just decided to give up running it after its losses. They said it was one of

the nominal banks that was licensed a few years ago.

"It is one of those

that doesn't make loans," said Saumura.

The National Bank officials

apparently hadn't decided yet whether a conservator would need to be appointed

to oversee the demise of the second bank. It wasn't clear whether the bank had

debts or creditors.

The National Bank's inexperience in shutting down a

bank has become painfully obvious with the government ordered shutdown of Credit

Bank on May 6. The independent auditors were refused access to the bank's books

and money was withdrawn by the government from the closed bank. There is still

no accounting of the bank's assets and liabilities.

The closing of more

banks has been widely expected since the shutdown of Credit Bank, owned by

Cambodian Canadians, put a spotlight on Cambodia's renegade banking community.

Credit Bank became engulfed in difficulties in March when some of its major

shareholders were sued by their Canadian stock brokerage for $1.5 million they

lost in currency trading.

International bankers and businessmen are

hailing the government crackdown which they say is needed to build confidence in

the banking system.

"It shows the National Bank has decided to firmly

handle the problem of the capitalization and the security of the depositors and

the creditors," said Didier Odin, senior vice president at Banque Indosuez. Odin

said: "I see here it is construed as a scandal. I see it as a strong signal.

Maybe it will incite banks not to take unreasonable risks."

Some of the

banks in Phnom Penh appear to be inert.

At Phnom Penh City Bank a

spokesperson said although they had been open since 1993 they had only about

five accounts and they didn't do business with the public. "We have a few

customers we know very well." When foreigners wander in to cash travelers checks

"we have to tell them we have no system," she said.

Business is no more

brisk at some of the other banks. The Thai-owned Cambodia Development Bank had a

"Closed" sign hung on the door one afternoon last week. A manager who opened the

door said the bank wasn't conducting any transactions that day because they were

"too busy."

Down the street at Global Commercial Bank, the situation was

much the same. Armed guards sat in chairs by the lobby and three or four

employees stood behind the counter, but a spokesman said "the bank is not in

operation." Global Commercial just opened a foreign office in Burma, according

to a report in the Bangkok Post.

Still, Saumura said that there had been

progress among the banks as a whole and a few of the older banks were making a

profit. She said there were too many banks for the size of the current market in

Phnom Penh, but if the banks were willing to wait a number of years for a return

they may make out fine.

In the meantime, more bank closures could be

expected. Some may voluntarily go out of business. Saumura said some of the

remaining 27 banks were undercapitalized and they had been told to get their

finances in order. Will they be shut down? "If they don't have the financial

strength to recapitalize, yes," she said.

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