The National Bank of Cambodia (NBC) has affirmed that commercial banking and finances have strong capital and liquidity although Novel Coronavirus outbreak is hitting the country’s economy.
NBC’s director-general Chea Serey, told Khmer Times that at present commercial banks and microfinance industries (MFIs) are in a good position after the NBC imposed strict rules on being prudent during the good times.
However, she added that the economic situation globally is not looking good and she is not sure when it will get better. “In this kind of situation we need to be prudent and make sure that whatever measures apply are sustainable for a longer term,” Chea added.
Say Sony, senior vice-president and chief marketing management of PRASAC MFI, told Khmer Times that its current business has been running well for the last three months.
“Our loan portfolio has grown about 8 percent from $2.501 billion in December to $2.725 billion on March 31, while our deposits grew about 2.25 per cent from $1.778 billion to $1.828 billion,” Say added. “Our non-performance loans (NPLs) slightly increased from 0.36 percent to 0.48 percent because of the COVID-19 situation.”
Oeur Sothearoath, CEO of Credit Bureau Cambodia, told Khmer Times that everyone is aware of the impact of COVID-19 which not only hit the local market but the global market as a whole. He said that from the database available as of February 2020, the credit market showed relatively healthy growth in the first two months of 2020.
“Taking cumulative figures of January and February 2020, total loan disbursements saw a 35 percent increase compared with the same period last year whereas late repayments (30 days past their due date) dropped from 1.49 percent to 1.34 percent in the same period,” Oeur said.
He said that the credit market started to slow down in the last two weeks of March 2020 and staff are still waiting for the full March 2020 data to review.
The Central Bank recently issued guidelines to financial institutions on loan restructuring. They were signed by the Bank’s Governor Chea Chanto.
The NBC said that all banks and financial institutions should focus on clients suffering from the impact of Coronavirus and prepare loan restructures for those in priority sectors.
These include tourism services such as hotels, guest houses and restaurants, the garment industry (including employees), construction (first-home buyers and shop owners with loans), transportation (but only taxis and tuk-tuk drivers) and logistics companies.
Chea, however, said that with regards to NBC guidelines, it didn’t limit them just to the construction, garment, tourism and transportation sectors but they are worth paying additional attention to because they are among the main pillars of the nation’s economic base.
The statement from the NBC read that the financial institutions should have in place written policies and procedures approved by the board that define the circumstances and conditions under which a facility may be restructured after being hit by the COVID-19 crisis.
“In order to identify cases for forbearance, banks should first determine whether the counterparty is experiencing financial difficulty at the time when the concession is granted. Loan restructuring shall not be granted to anyone who has defaulted on payments for more than 90 days but to those expecting to be experiencing only temporary financial and repayment difficulties with terms of agreement up to Dec 31, 2020,” it said.
The statement continued that, for non-performing loans, all financial institutions may keep their risk grading the same as when loan is restructured.
Concessions that lead to considering a facility’s classification as “restructured” could include reducing interest or repayment terms, postponing the interest or relevant fees, extending the loan term, changing an installment loan to interest payment only, releasing collateral or accepting lower levels of collateralisation and easing of covenants granting new or additional periods of non-payment (grace periods) of up to 60 days from the effective date of new terms.
All loan restructuring should be carried out by a special unit different from the one in charge of the lending process.