Banks in the good books

via CAAI

Tuesday, 07 December 2010 20:43 May Kunmakara and Catherine James

All of the Kingdom’s 30 commercial banks are set to meet National Bank of Cambodia requirements to triple their minimum capital by December 31, according to NBC officials.

Thai Saphear, head of the governor’s office at the NBC cabinet, told The Post that the banks were prepared to meet the deadline imposed by the central bank.

“I know that all the commercial banks have met and complied with the requirement – they don’t have any problem,” he said.

The NBC issued a prakas, or edict, in September 2008 requiring banks to triple the minimum amount of registered capital from 50 billion riel (US$12.3 million) to 150 billion riel by the last day of 2010.

Thai Saphear said the result reflected the strength of the Kingdom’s financial and banking industries.

The statements surprised some industry insiders, who expected the new requirements would lead to smaller banks closing or merging.

ANZ Royal Bank Chief Executive Stephen Higgins said he had expected some consolidation in the sector.

“It is surprising that some of these smaller banks found it financially sensible to inject this additional capital given the lack of lending opportunities available,” he said.

The prakas, which the NBC said was aimed at strengthening the sector, could create a barrier to growth because there was a risk of banks being over capitalised and less attractive to investors, according to Madi Akmambet, chief executive of the Advanced Bank of Asia.

“From shareholders and potential investors’ point of view, overcapitalised banks seem to be less attractive for new investments,” he said, adding the ABA had met the requirement with additional contributions from shareholders.

Dieter Billmeier, vice president at Canadia Bank, said he supported the prakas, calling it “good and wise, since it will strengthen the overall capital adequacy and liquidity ratios for risk exposures of the financial industry as a whole”.

NBC Director General Tal Nay Im had previously said she expected some banks would have to withdraw with the new requirements.

Yesterday, she told The Post that banks were making the effort to comply with the new requirements, though stopped short of saying all banks had met the deadline.

“The process is almost complete with good results,” she said.