Bank of Thailand asks others to weigh risks

via Khmer NZ News Media

Thursday, 24 June 2010 15:00 Catherine James

BANKS were asked to consider the risks involved in carrying agricultural sector loans by a Bank of Thailand representative during the second day of a macroeconomic policy seminar held in Phnom Penh Wednesday.

Rongporn Roengitya, senior examiner in the Bank of Thailand’s risk management examination department, said the risk of lending to agricultural enterprises was “much higher” than the manufacturing sector, which meant that banks might need to “hold” more capital to adequately service the risks.

“You can lend [to agriculture], but know your risks well,” she warned, highlighting the number of unpredictable factors involved in sector returns – such as weather and insect population.

Her comments during a broader presentation on Thailand’s macroeconomic experiences stemmed from discussions during the UN-led conference, where agriculture was highlighted as playing a key part in the future of Cambodia’s economy.

ACLEDA Bank’s CEO In Channy responded to the remarks.

He said that the bank had already taken on hefty loans to the agriculture sector and was well aware of the risks involved.

A total of 15 percent of ACLEDA’s loan book is focused on agriculture, he said, in large part because of its rural presence in Cambodia – a much higher percentage than the 3 to 5 percent most other banks carry.

He told the Post at the sidelines of the conference that the bank had capped its exposure at 15 percent and would not look to take on more, as it needed to diversify its risk.

The meeting also proved a chance for officials to address monetary concerns.

Neav Chanthana, National Bank of Cambodia’s deputy governor, took advantage of her closing remarks as chairperson for the morning session to call on the private sector to do more to strengthen the riel.

“I take this opportunity to encourage all the institutions to support the use of the local currency,” she said.

“We have a long term objective of ensuring our local currency be used as a means of payments and medium of savings,” she added.

“The government has worked so hard that we all receive and pay everything in the local currency. I think the private sector [needs to] take part in using the local currency more.”