Tuesday, 8 September 2009

Bad Loans on the Rise, Central Bank Warns

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
07 September 2009

Cambodia’s banking sector will not be able to avoid further consequences from the global economic downturn, with non-performing loans increasing, the National Bank’s director- told a workshop last week.

“For us, the economic crisis affected garment export, tourism, construction and real estate,” said Director-General Tal Nay Im said at a workshop on the nation’s banking system. “So the banks’ borrowers are facing a hard time paying back [loans] when they can’t earn from their businesses. That will cause [non-performing loans] to increase, and that’s a second-round affect that the national bank is worried about.”

The National Bank reported in June bad loans in 24 commercial banks had risen to 3.7 percent, about $2.4 billion, in 2008, up from 3.4 percent the year before.

But Tal Nay Im said the news was even worse through May, 2009, when non-performing loan figures reached 5.2 percent. The rate could reach as high as 10 percent by the end of the year, she warned.

The Foreign Trade Bank’s bad loan rate went from 30.7 percent in 2007 to 32 percent in 2008. Canadia Bank saw its number rise from 6.8 percent to 11.1 percent in that period. ANZ Royal Bank saw an increase from 0.4 percent to 2.6 percent in that period.

The National Bank report echoed annual reports of the International Monetary Fund and the World Bank, which warned of rising rates of non-performing loans in major banks.

Credit disbursement has also slowed, from a growth rate of 50 percent in 2008 to just 1 percent through the middle of this year.

“The banking systems are under threat,” Robert van Zwieten, director of the capital markets and financial sectors division for the Asian Development Bank, told VOA Khmer in a phone interview from his office in Singapore. “Marginally speaking, it is slightly weaker than it used to be. That’s what you would expect and that is not certainly usual.”

Van Zwieten said economic recovery will increase loan disbursement and lower the rate of bad loans. Meanwhile, the National Bank can play a key role, keeping an eye on banking operations, while banks themselves should be more careful in providing loans.

“Our bank works with big companies, and we have collateral,” said Gui Anvanith, managing director of the Foreign Trade Bank, which has the highest rate of non-performing loans in the country. “We will continue to be cautious and to strengthen the banking system.”

Tal Nay Im said the National Bank had followed up on an international evaluation to improve regulation and supervision.

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