Cambodia's banking sector has grown enormously on solid foundations since being rebuilt from scratch in 1979, central bank Governor Chea Chanto said yesterday during an event marking the 38-year anniversary of the re-establishment of the National Bank of Cambodia (NBC) after the fall of the Khmer Rouge.

The Khmer Rouge destroyed the country’s banking system, reduced the original NBC building to rubble and eliminated the national riel currency.

Chanto said the country’s banking sector has grown massively since the central bank was re-established on October 10, 1979, to guide and regulate the country’s financial institutions and re-introduce the riel currency. He said some of the most impressive gains have been made in the past 16 years, with the country’s banking assets growing more than 40 times since 2000.

“In the last 16 years fixed assets in Cambodia’s banking sector increased very fast, reaching a total of $32 billion, which is 41 times [the total in 2000],” he said.

Meanwhile, he added, the total loan portfolio of Cambodia’s banking sector increased 93 times during the last 16 years to reach $18.5 billion today, while deposits increased 52 times to reach $16.3 billion.

Chanto said the momentous growth was the product of a series of reforms and regulations by the NBC that created a healthy, vibrant banking sector. He noted that the first major reforms came in 2000 when the central bank imposed a minimum capital requirement of $12.5 million on all commercial banks operating in Cambodia.

The capital requirement resulted in 15 banks closing their door, but made for a stronger sector moving forward, he said.

In 2008 the NBC increased the minimum capital requirement on commercial banks to $37.5 million, and last year it doubled it to $75 million, giving banks until March 2018 to comply.

The NBC re-introduced the riel in 1980. According to Chanto, the central bank’s efforts to increase the use of riel have paid off, with circulation of riel banknotes increasing 16 times during the past 18 years to $2.2 billion today. Meanwhile, deposits in riel have grown fourfold over the past 18 years to $938.5 million today.

He added that macroeconomic tools introduced by the NBC, such as the launch of negotiable certificates of deposit and liquidity providing collateralised operations, have helped boost the circulation of riel in the economy.

Ngeth Chou, senior consultant at Emerging Markets Consulting, said Cambodia’s banking sector has deepened during the last four decades and has been one of the country’s best-performing economic sectors.

“The financial sector can be considered one of the fastest developing sectors during this period,” he said, adding that recent years have seen more diversification of banking products.