The tumultuous history of central banking and banking in Cambodia….

October 13, 2017
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Came across this talk by Cambodia central bank chief Chea Chanto on the 38th anniversary of the central bank. Via the talk one realised how the central bank and the banking sector was destroyed due to Khmer Rouge madness. Then saw the central bank history webpage which has pictures on how the building was destroyed in 1975 and then rose from rubble in 1979.

Since 1979, banking sector has expanded and has become the fastest growing sector in the country:

Chanto said the country’s banking sector has grown massively since the central bank was re-established on October 10, 1979, to guide and regulate the country’s financial institutions and re-introduce the riel currency. He said some of the most impressive gains have been made in the past 16 years, with the country’s banking assets growing more than 40 times since 2000.

“In the last 16 years fixed assets in Cambodia’s banking sector increased very fast, reaching a total of $32 billion, which is 41 times [the total in 2000],” he said.

Meanwhile, he added, the total loan portfolio of Cambodia’s banking sector increased 93 times during the last 16 years to reach $18.5 billion today, while deposits increased 52 times to reach $16.3 billion.

Chanto said the momentous growth was the product of a series of reforms and regulations by the NBC that created a healthy, vibrant banking sector. He noted that the first major reforms came in 2000 when the central bank imposed a minimum capital requirement of $12.5 million on all commercial banks operating in Cambodia.

The capital requirement resulted in 15 banks closing their door, but made for a stronger sector moving forward, he said.

In 2008 the NBC increased the minimum capital requirement on commercial banks to $37.5 million, and last year it doubled it to $75 million, giving banks until March 2018 to comply.

The NBC re-introduced the riel in 1980. According to Chanto, the central bank’s efforts to increase the use of riel have paid off, with circulation of riel banknotes increasing 16 times during the past 18 years to $2.2 billion today. Meanwhile, deposits in riel have grown fourfold over the past 18 years to $938.5 million today.

He added that macroeconomic tools introduced by the NBC, such as the launch of negotiable certificates of deposit and liquidity providing collateralised operations, have helped boost the circulation of riel in the economy.

Ngeth Chou, senior consultant at Emerging Markets Consulting, said Cambodia’s banking sector has deepened during the last four decades and has been one of the country’s best-performing economic sectors.

“The financial sector can be considered one of the fastest developing sectors during this period,” he said, adding that recent years have seen more diversification of banking products.

Meanwhile political situation is again problematic as the country is headed to a one-party State…

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