T he first government bank shutdown, of the Credit Bank of Cambodia, surprised
some members of the banking community but was oddly welcomed by others. They
said that with 29 banks and perhaps 100,000 customers, the country is simply
"Twenty nine banks! It's too many," said one Thai bank
manager, laughing. "They approve anyone. They approve people without banking
experience. It is not easy to run a bank in Asia."
Another bank manager
from Singapore agreed that banks seemed to sprout up in Phnom Penh during the
last year like green rice. "There are too many commercial banks," he said,
suggesting that more closings might come. Still, he said he was surprised by the
suddenness of the May 6 shutdown.
If the bankers are right, competition
may eventually lead to a shrinking of the industry. But the reasons behind the
closing of the Credit Bank of Cambodia, owned by Canadian Cambodians, appeared
to have nothing to do with the crowded market. A statement from Thor Peng Leath,
the general governor of the National Bank of Cambodia, accused the Credit Bank
of being grossly remiss in meeting regulatory requirements and said the decision
to withdraw the bank's license was to protect customers.
said that Credit Bank's banking license was being withdrawn because:
- the bank fell below the minimum capital requirement of $5 million
- it had failed to provide its shareholders with details of its
- its reports to the National Bank had been irregular,
- it failed to produce an accounting of assets and liabilities when
- it failed to appoint a 1994 auditor, and,
- its senior management had not remedied the problems despite warnings from
the National Bank.
Despite those allegations, the governor said if the Credit Bank proves it
"can meet the National Bank's requirements, the license could be
Besides the regulatory lapses, other allegations were still
surfacing this week involving possible money laundering, big losses incurred by
the bank in futures trading, an irate securities brokerage from Canada, and
threats of a lawsuit.
The Credit Bank remained closed with five guards
monitoring its iron gates, the flags of Cambodia and Canada hanging limply over
the entrance. Sy Veng Chun, chairman of the bank, couldn't be located for
comment. His lawyer, Sam Sok Phal, said the chairman was meeting with the
regulators in hopes of getting the bank reopened.
Credit Bank was
licensed a little less than a year ago, along with a flock of other banks from
Hong Kong, Singapore, Thailand and other countries, as well as Cambodia, at the
time when the idea was to get a private banking industry on its feet. Since
then, new licenses have been stopped.
For several months, the financial
reports filed by Credit Bank showed little activity, but that was not surprising
because other banks also didn't appear to have any customers. "The bank did not
have any deposits, month after month," said Tioulong Saumura, deputy governor of
the National Bank. She said the bank's financial problems became evident when it
filed its annual report March 31, showing its capital had fallen below the
minimum requirement of 10 billion riel, or $5 million. Bank officials were given
15 days to come up with new capital, and when they failed the decision was made
to close the bank.
Sam Sok Phal, the lawyer for Credit Bank, said the
closing was premature. He said it occurred only after a Canadian brokerage house
complained to the National Bank that the Credit Bank owed it as much as $1.5
million for futures trading losses. He said the stock brokerage, Marleau Lemire
Clearing Inc. of Montreal tried to sue his client in Canada. Now, he said, "they
come here to make trouble."
"We may sue Marleau Lemire," he said. "My
client wants to negotiate with the National Bank first."
Saumura said the
fact the Credit Bank had relatively few depositors appeared to be good news for
regulators because it meant the bank had few liabilities. She said that so far
only three depositors had been identified but more may come forward. She said
the bank had some loans outstanding, and an administrator was supposed to be
appointed to oversee the operation.
She was skeptical about the bank's
prospects for reopening, despite the National Bank governor's encouraging
statement. "I don't think he should have said so," she said, referring to the
governor's statement. "It looks like he is stepping backwards."
possibility of the Credit Bank's shareholders being linked to money laundering
was also raised.
Saumura said it appeared that one of Credit Bank's
shareholders had been charged in Canada in a money laundering
Saumura has been working on a money laundering analysis for some
time. She said her report will recommend that the government set up an agency to
investigate Cambodia banking and money laundering. It is commonly believed that
many banks in Cambodia are involved in laundering cash. She said the governor
has been balking at releasing her recommendations. "I don't know why he won't. I
am going to release it even without the permission of the governor," she
She said one of the indications that Credit Bank might be involved
in money laundering was that the bank was set up with nominee shareholders,
presumably in order to not disclose the true identity of the shareholders. In
addition, she said, one shareholder, the wife of the bank's chairman, had been
implicated in money laundering in Canada. "She is Canadian and Cambodian,"
Sam Sok Phal, the bank's lawyer, said that the money
laundering charges were not true. "She didn't do it." He said all the problems
stem from the stock brokerage. In a May 6 article in the Montreal
Gazette, the company, described as a "fast growing Montreal brokerage firm",
had just been fined $165,000 by securities regulators for brokerage violations.
He would not identify Credit Bank's real shareholders.
The National Bank
officials said they have been inundated with questions about the bank's
Saumura denied that any more banks were due to be shut down.
"When a new sector opens up it is normal that new companies come in; it is also
normal that some will go away. Some are going to close by themselves. I prefer
to let natural selection take place."
She did say that Emperor
International Bank might come under scrutiny in the wake of a report in the
Far Eastern Economic Review. The magazine said the principals of Emperor,
a Hong Kong conglomerate, had legal problems in Hong Kong and China. The
magazine also said Hun Sen himself went to Hong Kong to give Emperor its
Cambodian banking license in 1993.
Thor Peng Leath also discounted
speculation that more banks will close. "Don't worry about that," he said.