Crisis or challenge? The state of Cambodia’s banking industry

Crisis or challenge? The state of Cambodia’s banking industry

Even as the foundations of the banking industry in the Kingdom remain solid and continue to be resilient based on prudential financial ratios, cracks are visible enough to demand urgent action, not deflection, not delay.

Crisis—An unstable or crucial time or state of affairs in which a decisive change is impending, especially one with the distinct possibility of a highly undesirable outcome.

Challenge—A difficult task or problem or an activity whose difficulty provides enjoyable intellectual or physical stimulation. (Source: The Merriam-Webster Dictionary)

As of December 31, 2025, Cambodia’s banking industry stood at an impressive asset base that tells a remarkable story of growth, along with growing pains.

Over the past decade, the banking industry recorded an extraordinary 400% surge in asset value, climbing from USD 20.2 billion in 2015 to USD 101.8 billion in 2025. (Source: National Bank of Cambodia – Banking Supervision Report).

That kind of trajectory would be the envy of many markets across the region. Yet today, the conversation has shifted. The question being whispered, and increasingly spoken across industry circles and boardrooms, is this: “Is Cambodia’s banking sector facing a crisis, or is this simply a challenging chapter in a longer growth story?”

Loans & NPL | We get what we give

Lending growth has slowed to a decade low, while non-performing loan (NPL) ratios have climbed to historical highs and continue to rise. These two indicators, moving in opposite directions, are telling us something important. As I have explored in previous articles, this is not a coincidence—it is the consequence of years of aggressive lending, (more) relaxed credit discipline, and an environment that (possibly) prioritised growth over governance. Cheaper and lower cost of funds (pre-Covid 19) also contributed to a period of aggressive lending growth.

We are reaping what we sow. The silver lining: Recognising the root cause is the first step toward course correction.

Sanctions & liquidations | Shaken, not stirred

In less than 12 months, we have witnessed a troubling wave of financial institutions being sanctioned and placed under liquidation. Some observers suggest Cambodia may have recorded one of the highest numbers of bank sanctions and liquidations in Asia within this same period, a distinction no country wants. This is damaging, not just operationally but also from a reputation angle.

Perception (besides trust) matters enormously in banking, and confidence, once eroded, is painfully slow to rebuild and regain.

It is easy, and frankly, lazy to engage in hindsight analysis after the fact. The industry is never short of “hindsight specialists”. But what we truly need are foresight practitioners—regulators, board of directors, shareholders and employees who ask the hard questions before such incidents occur, not after a bank collapse.

There is no perfect formula to prevent bank failures. But there is absolutely no excuse for allowing institutions with chequered histories and questionable shareholders to operate in the first place.

Every stakeholder, including regulators, external auditors, shareholders, and industry associations, must play their proactive part in safeguarding the sector’s integrity and reputation.

Confidence has been shaken. But the industry remains resilient. We must act before it is broken entirely.

People & power of knowledge | We don’t know what we don’t know

Perhaps the least discussed but equally consequential impact of this weakening in lending growth and high NPL on human capital. The current environment is creating real headwinds for talent development. We see more banking professionals actively exploring new opportunities; evident by increasing industry attrition levels.

A slowdown in lending means fewer chances to work on complex transactions, develop credit skills, and grow professionally. We know a substantial part of Cambodia’s banking activity and profitability is driven by lending activities.

A slowdown in lending (and banking) activities could cause corresponding lower investments in learning and developing, and this could cause a generation of bankers to be stunted in their development.

Any successful banker (or person) will also tell you that a key recipe for success is continuous learning.

Institutions that invest in people during the difficult periods will emerge with a significant competitive advantage when the cycle turns, and it will certainly turn.

Epilogue

So, are we facing a crisis or a challenge?

This is, quite literally, the hundred-billion-dollar question.

We are facing a challenge to confidence, but not yet a crisis of collapse.

The foundations of the banking industry remain solid and continue to be resilient (based on prudential financial ratios such as solvency and liquidity ratios), but the cracks are appearing and visible enough to demand urgent, collective action—not deflection, not delay.

Cambodia’s banking sector has proven its capacity and track record for remarkable growth. The question now is whether its stakeholders have the discipline and courage to steer through this challenging period with accountability and enforce the correct actions needed.

The next chapter is still being written. And how it’s written will define the industry for the decade ahead.

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