More than $600 million flooded out of Cambodia’s entire banking system during the third quarter of this year, as fears of post-election chaos set off panic and mass withdrawals, new figures from the National Bank of Cambodia (NBC) reveal.
The figures, obtained yesterday, were the first system-wide indicators of how the banking sector fared since the July 28 poll awarded the election to the ruling Cambodian People’s Party. The results triggered allegations of foul play from the opposition, creating a tense stand-off marked by protests and go-nowhere negotiations.
National Bank of Cambodia Director General Chea Serey said yesterday that the sharp decline was expected every five years due to elections, but that this time around, it “probably” was the largest dip ever.
“When there are elections there is a bit of uncertainty,” she said. “After all, this is a young economy, there have only been five elections,” she added, referring back to the UN-backed poll in 1993.
Tensions have been high since disputed voting results came in months ago. Though largely peaceful, subsequent demonstrations by the Cambodia National Rescue Party were met with a heavy security presence in the city, and one man was shot and killed after authorities descended on a bridge to quell protestors in September.
The climate of fear extended to the financial sector, where many mistrusted the level of security maintained at banks. Deposits fell from $7.2 billion at the end of June 2013 to $6.6 billion at the end of September.
That means that account holders withdrew close to $630 million, or 8.7 per cent, of the total number of deposits held in Cambodia’s 34 commercially registered banks.
While large, the decrease did not astound observers, who have seen the same during the past several months with other financial institutions.
Acleda, the country’s largest bank, reported last month that customers withdrew $200 million in the period around and following the election.
Confident that customers would return, Acleda president and CEO In Channy said at the time that the bank had regained close to $186.5 million in little over a week after the quarter ended.
Industry leaders and economists echoed Channy’s positive outlook yesterday, pointing out that Cambodia’s banking system could even build trust with consumers by showing that it can weather a storm.
Charles Van, president of the Association of Banks in Cambodia, said the industry had made it through the withdrawal frenzy, and he did not expect any lingering effects.
“It always happens in the country during the election process. The money is withdrawn but then over a period of time the money comes back.”
Independent economist Chan Sophal said he had not seen any severe impact on other parts of the economy, as “the banking sector was able to absorb the shock”, he said. “It could even increase confidence in the future because of this precedent.”
Serey at the NBC agreed that there were no clear economic ripples bubbling, but that Cambodia’s economy always needed to be monitored.
“As regulators, as a central bank we would always be on the watch, whatever the situation. If it is not something that happens here it is something that happens outside that can spill over on us,” she said.
Not all believed the economy had turned the corner. Kang Chandararot, director of the Cambodia Institute of Development Study, said that as long as the political stand-off continues (the opposition is still boycotting parliament, the ruling party isn’t giving in on their demands) the cost of investing in the country could increase.
“The longer it holds, the worse the economy,” he said.