By Raymond Sia
I am a big fan of the music band – U2. One of my all-time favourite album is the 1991-released album “Achtung Baby”; which has a track that inspired the title of this article.
The title of this article is also apt for the Chinese community as they have just ushered-in the Chinese New Year of the Fire Horse. In Part I of this title & series, I will cover the Banking sector; an important sector and economic pillar to Cambodia (and to any country); with some key trends & observations.
Year 2026 in the banking sector has started with what would be descriptive of the “Fire Horse”; which is expected to bring rapid changes, transformation and disruptions.
- Liquidation
There have been a lot of interest and market noise in recent weeks with regards to the closure & liquidation of 2 commercial banks. Such news will often create some level of anxiety in the public domain but these actions were necessary to protect the integrity & resiliency of the industry.
Credit is to be given to the Regulators in ordering the ceasing of operations of any banks which are non-compliant to financial and non-financial compliance & governance. This is essential and critical to safeguard the interest of the public and to ensure resiliency of the industry.
Cambodian banking industry is fragmented with many players. The vintage, history, background and business focus of each bank differs. We do hope there is no other banks that would fall-short on their financial / capital / liquidity / solvency obligations but no one can predict the future.
On this note, it is important for both customers and banks to be more vigilant.
“Caveat Emptor & Caveat Argentaria – Buyers (Customers) & Banks Beware”.
Customers and public ought to ensure they conduct their own due diligence before placing their hard- earned savings in a bank and not be tempted with too-good-to-be-true promotions or interest rates.
Banks would also need to ensure they maintain the appropriate level of financial and governance discipline and not be tempted to do “dumb things” (in the exact words of Jamie Dimon – CEO of JP Morgan Chase; in a recent interview where he spoke about elevated risk in the market).
“Waves of regret and waves of joy, I reached out for the one I tried to destroy – Until The End Of The World / U2
- Lending
I have always held to the view that for any country; more so for an emerging market like Cambodia; lending growth (to the right industry sectors) is critical for the development of the economy.
There is also a balance that is needed to ensure lending activity is appropriate and not excessive which could result in over-leverage situation for the customer. An over-leverage situation is dangerous for both the borrower and lender.
Banks need to practice “Responsible Banking”; to ensure their customers have adequate & proper financial literacy and repayment capacity before providing loans to them.
More concerted efforts are needed to stimulate lending activities (to the right customers). Cambodia has experienced one of the lowest lending growth rate the past 2 years in 2 decades; alongside the highest non-performing loans level in the same period. This trend is worrying if it persists.
Targeted sector(s) lending is an option for consideration and this would require all stakeholders to identify the (productive) sectors that require funding. Concerted efforts with some periodical lending targets can be given to ensure there is moral suasion to act and achieve these lending targets.
“You’re dangerous, you don’t know what you want – Who’s Gonna Ride Your Wild Horses / U2”
- Liquidity
Cashflow is the blood line of any business; banking business included. Due to the fragmented state of the industry, we are seeing a wider divergence in deposit interest rates offered between larger banks vs smaller banks. This trend is worrying; notwithstanding the industry deposit growth seen in 2025.
Commercial banking business model is fairly simple; i) ensure funding is adequate, ii) ensure lending business is healthy, and iii) ensure loans are repaid and avoid delinquency in their lending activities.
A customary liquidity ratio which all bankers are watchful over is the Loans-to-Deposit ratio (“LDR”). There is no right or perfect number on LDR but many banks would often operate in a range of 80%-90%; and avoid a ratio that exceed 100%. The LDR for Cambodia Banking Industry has been on the decline; from over 100% in the past 2/3 years to below 100% in 2025.
Optically, the reduced LDR appears encouraging and healthy. However, a more thorough analysis is needed to verify and substantiate the actual status of the financial health of the financial institution. This would include the reason(s) behind the reduced or lower ratio i.e. reason(s) for the lower loans position and/or higher deposit position.
Even a high level of liquidity cannot be assumed to be positive all the time or taken for granted. Liquidity can be drained quickly. This is even more apparent in this digital age where money & fund flows seamlessly via digital channels regardless of day or time. Concentration of depositors and Maturity Gap (between assets and liabilities) are a few risk assessments for liquidity analysis that can be considered.
“We’re one but we’re not the same – One / U2”
Epilogue
Banking continues to evolve and in an emerging & evolving market like Cambodia, we would expect this trend to be more apparent and also more dynamic.
Both banks and bankers need to ensure proper conduct & compliance are adhered with; alongside (in their best ability & efforts) good judgement in their actions to safeguard the repute of the industry and the individual; and continued trust of the customers / public.
Part II will return….
Raymond Sia currently serves as the Managing Director of Canadia Investment Holding Plc and Board Director for Canadia Bank and Credit Bureau Cambodia. Raymond is a big fan of U2 and strongly advocates Responsible Banking. He is also the author of the “Right Angle – The Collection Volume One” which is available for sale. The views expressed above are strictly the author’s personal opinion and do not represent the organisations & institutions he is attached with or represents.
