Mid-size lenders ask NBC to defer capital requirements

Photo by: Sovan Philong
Traffic passes by a Union Commercial Bank branch on Sunday. CEO Yum Sui Sang said he was unsure that UCB could raise its registered capital to US$37.5 million by the end-of-2010 deadline.

The Phnom Penh Post
Monday, 14 September 2009 15:00 Nguon Sovan and Nathan Green

Central bank director has said there are no plans to push back a plan to triple registered capital by late 2010 to boost stability

AS the deadline nears for each of the Kingdom's banks to raise their minimum registered capital to US$37.5 million, some mid-sized lenders have called on the central bank to push back its late 2010 deadline, citing the effects of the financial crisis.

However, the chief executive officers of Advanced Bank of Asia (ABA), Madi Akmambet, and Union Commercial Bank (UCB), Yum Sui Sang, both said their banks were eyeing ways to raise the required capital.

The National Bank of Cambodia (NBC) mandated in September that each bank boost reserve requirments from $13 million to $37.5 million effective from the end of 2010.

Akmambet said the increase was justified to boost stability in the banking sector, but he questioned the timing, given that global credit had tightened considerably since the middle of 2008.

"Since markets have been affected by the global downturn, there might be some obstacles to arranging additional [capital] injections," he said. "I'm not talking about ABA, but generally. That's why it would be logical and fair if the deadline were postponed."

Yum Sui Sang said the global economic crisis had waned in intensity but still posed problems for banks trying to raise additional capital, meaning the central bank should re-evaluate its end-of-next-year deadline.

"We don't know yet if we can meet the requirement by the deadline, but we have many shareholders, and we have one more year to find the money," he said.

UCB has $22 million in registered capital, whereas ABA has $23 miliion, the CEOs said.

According to the NBC's 2008 annual report, just four of the 24 commercial banks registered at the end of last year had $37.5 million in registered capital. These were Cambodia Public Bank, ANZ Royal Bank, ACLEDA Bank and Canadia Bank. There are now 28 commercial banks in Cambodia.

Central bank Director General Tal Nay Im said last week the policy would not change, arguing that it is necessary to ensure that only serious banks set up operations here. "The increase in registered capital is to target bankers without an adequate banking history and influential patronage," she said.

Akmambet said ABA had a range of options for meeting the requirements, including a cash injection from shareholders, a merger with another mid-level player "if we could see a synergistic result", or an investment from a strategic partner. "There are a lot of opportunities, and we will choose the best one," he said.

Lim Loong Seng, chief operating officer and country head at OSK Indochina Bank, said the bank had already increased its capital from $13 million to $25.2 million as of May, and would use capital from its Kuala Lumpur-based parent - Malaysia-listed OSK Investment Bank Berhad - to reach the $37.5 million target.

ANZ Royal CEO Stephen Higgins said there was no reason for the central bank to rethink a "very sensible policy" that would result in stronger banks.

"I believe Cambodia is moving past the worst of the crisis, and by the time this rule takes effect, the bank sector should be in pretty good shape. Also, most customers are already with banks who meet the minimum requirements today, so it shouldn't be a major issue," he said.