Cambodian and Southeast Asian banks have been successful in avoiding euro zone contagion, International Monetary Fund officials have said.

Local banks throughout the region have stepped into roles that would have been covered by European banks, effectively deleveraging Southeast Asia from crisis, José Viñals, financial counsellor and director of the IMF’s Monetary and Capital Markets, said recently during the IMF’s spring meetings in Washington, DC.

“And these substitutions have very much kept things normal. This is the story in the last few months,” he said. “I think that all countries need to remain vigilant. Make sure they have sufficient policy room for manoeuvre to cope with their home issues but also with potential external shocks coming from the volatility of capital flows.”

The IMF’s February staff report on Cambodia called on Cambodia to rein in the number of banks in the Kingdom by issuing less banking licences.

But striking the right balance between expanding Cambodia’s banking sector and regulation of the existing sector would be key for country, Masahiko Takeda, the IMF’s director of its Asia-Pacific department, told the Post.

“[The sector] should move cautiously, hand-in-hand with improvements in the capacity of bank supervision,” he said at the meetings.

To contact the reporter on this story: May Kunmakara at [email protected]