Earlier this month, Silicon Valley Bank (SVB) and then Signature Bank were taken over by regulators after collapsing under the weight of billions of US dollars in withdrawal requests made around the same time, triggered by fears of the lenders’ insolvency, in what is termed a “bank run”.
On March 13, President Joe Biden assured that the US banking system remains “safe”, explained how his administration is responding to the situation, and called for more stringent regulations to protect banks against failures.
Speaking at a graduation ceremony in Phnom Penh, the prime minister argued that the fall of the two banks does not pose a significant risk of contagion in the Cambodian banking system, nor will it have a severe impact on the global economy.
“I urge anyone who has deposited money in a [local] bank not to panic,” Hun Sen said, underscoring that doing so would be contrary to the common good.
“We call on the people to place their trust in [regulators’] abilities to manage the Cambodian banking and financial sector – banks have enough reserves to resolve any issues,” the premier stressed.
Although the 1997 Asian financial crisis caused some chaos among Cambodian banks, the adverse effects of the 2008 global financial crisis were minimal in the Kingdom, which at the time raised the reserve requirement ratio (RRR) from seven to 12 per cent to prevent more damaging consequences, he recapped.
RRRs are central bank regulations that set a minimum amount of cash which financial institutions must hold in reserve. The Cambodian RRRs for foreign and domestic currency deposits currently stand at 12.5 per cent and eight per cent, respectively, according to the National Bank of Cambodia’s (NBC) website.
ACLEDA Bank Plc president and group managing director In Channy claimed to The Post on March 16 that Cambodia’s “strict” financial regulatory frameworks, managed by the NBC, would make certain that these developments in the US have negligible bearing on the Kingdom’s banking and financial system.
“It’s isolated from our business environment. And it’ll never impact our banking system and industry at all, since we’re in a very different market environment. The banks here are under Cambodian laws and regulations, and we are supervised and regulated by the NBC.
“Cambodia is a small country, but our regulator [the NBC] is full of experience. They are conservative, but proactive when it comes to risk mitigation. Banks here are in the economic environment of Cambodia. We don’t have anything to worry about, because in the banking business, we’re always cautious at every step we take.
“And of course, we must comply at all times with both local and international regulations. We always keep in mind that there are two important sources of risks – among many – apropos of which, banks must take cautious action all the time: liquidity and credit,” he said.
Cambodia Post Bank (CPBank) CEO Toch Chaochek told The Post on March 16 that the two US banks in question were not large enough to pose systemic risk to the global economy.
He explained that while SVB was indeed large, its tech and start-up focus may have been too niche and risky, and its collapse followed a spate of layoffs in the bank as well as among its clientele, resulting in the closure of a considerable number of accounts.
At least at CPBank, there have been no signs of panic withdrawals, he affirmed. “The financial sector is chugging along as usual, as are lending operations.”
With almost all loans in the Cambodian financial sector secured against collateral, and local sources accounting for a sizeable share of domestic bank capital, “we are 100 per cent secure”, Chaochek stated.