Help Promote Growth, Keat Chhon Urges Banks
He suggests lowering the reserve rate even more, though, as local banks are not able to find capital from foreign banks. (24 February 2
Finance Minister Keat Chhon on Thursday urged commercial banks to expand their loans as a counter to the global economic slowdown, which has already lowered projected growth for the country. “Banks have to play a role in helping the economy,” Keat Chhon told VOA Khmer. “Now the government has arranged for them to take a role by lowering the reserve requirements.” In September 2008, the National Bank increased reserve requirements for commercial banks, from 8 percent to 16 percent, to help secure deposits. But Keat Chhon said that requirement will now be lowered to 12 percent. Adjustments to the banking sector come amid a credit crisis in America that has led to a recession and global financial uncertainty. In Cambodia, the crisis has hurt garment manufacturing, construction and tourism—three pillars of the economy—and the World Bank recently lowered its growth forecast for the country, to 4.9 percent, compared to a rate of 7 percent in 2008. In Siphan, head of the credit division for Acleda Bank, said the decrease of reserve requirements will allow his bank to have more cash ready for credit and loans, from about $470 million in 2008 to $700 million in 2009. “We have enough cash to lend,” he said. “We can provide any kind of credit, because we will increase our loans about $300 million.” Other major banks like ANZ Royal, Cambodian Public and Japan Maruhan are committed to expanding their loans as well. However, In Siphan said even with banks expanding their loans, only a limited number of investors is currently looking for credit. Som Ganty, a financial expert at the Royal University of Law and Economics, said loan expansion by commercial banks would provide more cash flow for investors, which could help Cambodia escape the most serious impact of the financial crisis. He suggests lowering the reserve rate even more, though, as local banks are not able to find capital from foreign banks. “The reserve requirement should be as low as 8 percent, so the banks will be able to increase money lending,” he said. Tal Nay Im, director of the National Bank, said the central bank has no plan to lower reserve requirements further. Commercial banks will have to find resources through foreign lenders to continue their operations, she said.