Cambodia’s Banks Struggle To Balance Loans And Deposits

0
1708

160503-b2b---news---cambodia's-banks-struggle-to-balance-loans-and-deposits_USE

Cambodia’s loan-to-deposit ratio in 2015 surpassed 100 percent, a sign that banks will be unprepared in the case of any economic disruptions such as a regional financial crisis, the  Phnom Penh Post reported on May 3.

Ideally, a bank’s loan-deposit ratio should be around 80-90 percent so they can adequately cover their lending activities while keeping cash on hand for contingencies, according to a recent Forbes article. As a point of comparison, the US loan-to-deposit ratio hit 100 percent in late 2008, the midst of the Global Financial Crisis, but dropped to 77 percent by 2015, according to Forbes.

A recent survey by the National Bank of Cambodia, the Kingdom’s central bank, found that while deposits in 36 commercial banks and 11 specialised banks reached $11.5 billion in 2015, they had outstanding loans of $12 billion. Outstanding loans also grew at a faster pace from the previous year, up 25.8 percent, than deposits, which grew 17.7 percent.

Stephen Higgins, Managing Partner at Mekong Strategic Partners, however, told the Phnom Penh Post that this scenario was not uncommon for a developing country but banks needed to be careful. “A loan-to-deposit ratio above 100 percent is not necessarily a bad thing,” Higgins told the newspaper. “It basically reflects that Cambodia is importing capital via the finances sector, which it needs to do to support the level of investment required.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here