It was generally a quiet quarter for the banking and finance sectors in Cambodia, with few major initiatives promoted; however, smaller acquisitions and bancassurance tie-ups were the flavour of the day.
Amid rumours that Cambodia’s central bank is close to announcing a roadmap for the creation of Cambodia’s first national deposit insurance scheme (DIS), banking experts said the proposed mechanism would boost confidence in the Kingdom’s financial system and provide an extra layer of insulation for depositors in the event of a bank run or collapse.
A deposit insurance scheme is designed to reimburse depositors when a bank fails or is unable to repay the money they have deposited. Where it exists, an effective DIS is a pillar of the financial safety net, protecting bank depositors while contributing to the stability of the country’s financial system.
Cambodia’s national debt stood at $5.7 billion at the end of June, totalling about a third of GDP, according to a report on the national budget submitted to the National Assembly.
The report, prepared by the Ministry of Economy and Finance, revealed the government had signed agreements to receive more than $8 billion in new concessional loans since 1993. About two-thirds of these loans were disbursed by foreign governments, while the remaining third were issued by international lenders.
Cambodia’s central bank launched a weekly issuance of Negotiable Certificate of Deposits (NCD) with selling scheduled for every Wednesday – a move aimed at developing the interbank lending market by promoting a secondary market for the short-term interest-bearing certificates.The National Bank of Cambodia first introduced NCDs in late 2013 with the objective of providing an instrument for banks and financial institutions to better manage their liquidity.
Cambodia’s economy has proved both strong and resilient, driven by the solid performance of its garments and construction sectors, the World Bank said in its latest review of the Cambodian economy.
However, sustaining this growth is becoming increasingly difficult amid growing competition and shrinking global trade.
The Kingdom’s robust economic growth will continue, “propelled by exports, construction and government consumption,” said the bank. However, it also warned of downside risks, including potential uncertainty related to upcoming elections, fallout from an expected rise in US interest rates and slower global growth.
Thailand’s Bank of Ayudhya released its first financial statement since completing its acquisition of Cambodian micro lender Hattha Kaksekar Limited (HKL), showing a quarterly year-on-year net profit increase of 10.6 percent.
While Bank of Ayudhya, Thailand’s fifth-largest commercial lender, did not fully include the acquisition of HKL in its revenue calculations, it noted in its filing that the purchase of a 100 percent share in the Cambodian microfinance institution would likely boost its performance for the rest of the year.Bank of Ayudhya acquired HKL in September for upwards of $140 million.
Tess International, a Malaysia-based provider of software solutions for the financial sector, has signed a distributor agreement with Cambodian management consulting and business technology firm IdeaLink Consulting to provide software to Cambodian banks and microfinance institutions that helps them combat financial crimes.
IdeaLink said Cambodia’s booming financial and property sectors have resulted in a sharp increase in the number of financial transactions, as well as the amount of money transferred into and out of the country each year. This creates opportunities for money laundering, where illicitly gained proceeds, or “dirty money”, are made to appear legal, typically through transactions involving offshore banks or legitimate businesses.
The chief executive of ANZ Royal Bank denied media reports claiming the Australian and New Zealand Bank Group (ANZ) is considering pulling the plug on its Cambodian operations amid a planned retreat from the region’s markets.In a filing to the Australian Securities Exchange, ANZ announced it was selling its wealth and retail operations in Singapore, Hong Kong, China, Taiwan and Indonesia for about $80 million, taking a loss of nearly $250 million in the process. It said the move was aimed at focusing on institutional banking, while shoring up its primary asset base in Australia and New Zealand.
Rapid credit growth continues to pose a risk to financial stability in Cambodia, requiring more regulation to reduce the impact of a possible economic downturn and more adequate assessments of loan defaults in at-risk sectors, according to the International Monetary Fund.The IMF published its recommendations for the Cambodian economy following a consultation it carried out in October. The report listed US interest rate hikes, uncertainty from Brexit, the Chinese economic slowdown, and a high level of dollarisation in Cambodia as some of the main challenges facing the Kingdom’s economy.
Real estate firm Century 21 Mekong, one of nearly 20 independent real estate offices operating as part of the Century 21 franchise in Cambodia, plans to float shares on the stock market to raise funds for expansion, a company executive said.Chrek Soknim, CEO of Century 21 Mekong, said the firm submitted a letter of intent to the market regulator and aims to list by the second-half of 2017.Soknim said he could not comment on the size of the stake to be offered or targeted proceeds. He said the company was currently seeking a suitable underwriter and professional auditing firm.
The Central Bank announced that it exchanged 3.76 billion of old and worn Khmer riel banknotes (equivalent to $930,091) to new notes during its “Loving Riel Notes”, campaign which lasted five days during the Pchum Ben holiday.
The National Bank of Cambodia launched the campaign in September to allow people to exchange their old riel banknotes for new ones of the same denomination provided they were not severely damaged. The bank said it would hold more banknote swaps to promote the use of riel currency.
New data released by Cambodia’s independent credit reporting agency for the third quarter showed an overall increase in loan applications after a large contraction during the previous quarter, signalling what analysts described as renewed seasonal lending by financial institutions.The Credit Bureau Cambodia said that overall credit applications – which include personal finance, credit cards and mortgages – increased overall by 24 percent, compared to the previous quarter. The growth was primarily carried by an increase of mortgage applications, which grew by 75 percent, followed by credit card applications at 33 percent, and personal finance at 22 percent.
With the ongoing debate over whether the government should take interventionist measures to impose an interest rate cap on Cambodian lending institutions, an economic researcher at the central bank has concluded that any manipulation of current free market practices would have broad negative consequences.Leng Soklong, an economic researcher for the National Bank of Cambodia said that while interest rate caps were used in 62 of 152 World Bank member countries, it was typically employed as a blunt instrument with mixed results. Soklong indicated that if Cambodia adopted interest rate caps it would cause loan sizes to grow, diminishing the ability of MFIs to lend.
Tanncam Investment Company, an Uzbeki-owned investment company registered in Cambodia, agreed to purchase a 30 percent stake in financial services firm Cambodian Investment Management (CIM) and its related group companies for an undisclosed sum.CIM, a Cambodian subsidiary of Indonesia-based PT Covenant International Management launched in 2009, provides corporate finance, tax preparation, accounting and consultancy services.
A spokesman for Tanncam said this was the first investment the company has made since launching in Cambodia two years ago.
Cambodian microfinance institutions said they would comply with a new regulation issued by the central bank that requires them to hold at least 10 percent of their loan portfolio in the Kingdom’s national currency.
A prakas published by the National Bank of Cambodia requires all commercial banks and MFIs to adopt the measure over the next three years in order to promote riel usage, adding that the central bank could take any necessary action if needed to make lending institutions comply.
Prominent banker Bun Mony resigned from his position as CEO of Sathapana Bank after more than 20 years at the helm of the financial institution, in which it grew from being a small rural NGO into the country’s third-largest microfinance institution (MFI). Most recently, the company transitioned into a full-service commercial bank.
His departure leaves Sathapana under the interim stewardship of Lim Aun, the bank’s former chief operating officer. Mony has already jumped into his new role as board chairman of newly formed Vithey Microfinance.