The next phase of Cambodia’s banking development must focus not simply on responding to troubled institutions, but on:

•  identifying vulnerabilities earlier;
• intervening sooner; and
• making responsible banking more measurable.

This Article Provides A Solution! 

Cambodia’s banking industry has spent more than two decades building something significant.

From a relatively small financial system, it has developed into a banking market with approximately US$100 billion in assets, increasingly sophisticated digital infrastructure, broadening financial access, stronger regulatory architecture and banks capable of supporting businesses, households and major investment across the Kingdom.

That achievement should not be underestimated.

Neither, should one ignore the warning signals, now appearing within parts of the system.

Within approximately seven months, five commercial banks; Prince Bank, Panda Commercial Bank, CCU Commercial Bank, Heng Feng (Cambodia) Bank and HH Bank (Cambodia), have been placed into liquidation or had their banking licences revoked. The latest three institutions were placed into liquidation in August 2026.

Importantly, the National Bank of Cambodia (NBC) has emphasised that these three institutions represented only around 0.5% of banking-sector assets and credit, while the broader group of recently closed institutions represented only a small fraction of the overall system.

That distinction matters!

Five bank closures do not automatically mean Cambodia has a banking crisis.

But five closures in such a short period should equally not be dismissed as irrelevant.

The correct response lies somewhere between complacency and alarm.

It requires perspective.

It requires transparency.

And, above all, it requires foresight.

The question Cambodia should be asking is therefore not simply:

“Why did these banks close?”

The more valuable question is:

“What can Cambodia learn from these events so that future weaknesses are identified, corrected and contained long before liquidation becomes necessary?”

That is where the next stage of Cambodia’s banking development should begin.

 

A Stronger System Can Still Contain Weaker Institutions

It is important to separate institution-specific weakness from system-wide weakness.

Cambodia’s banking system remains substantial. By June 2026, banking and financial-system assets stood at approximately US$99.8 billion. Outstanding loans were around US$64.2 billion, increasing 4.6% year-on-year, while customer deposits grew around 4.4% to approximately US$64.4 billion.

Those numbers do not describe a financial system in free fall. AMRO’s latest assessment similarly concludes that Cambodia’s banking system overall retains meaningful resilience and sufficient buffers, while identifying greater vulnerabilities among some smaller institutions because of weaker profitability, lower capital strength and higher NPLs.

That is another important distinction!

A mature banking system should be capable of allowing a weak or non-viable institution to exit without destabilising the entire market. In fact, a regulator prepared to revoke licences and place institutions into orderly liquidation, when necessary, should not automatically be interpreted as evidence of regulatory failure.

It demonstrates the opposite:

That minimum standards matter and that banking licences are conditional upon institutions continuing to meet acceptable financial, governance and regulatory requirements.

The objective should therefore never be to preserve every bank indefinitely.

The objective should be to preserve the integrity of the banking system.

At the same time, liquidation is the final stage of the process.

The real measure of financial-system maturity is increasingly what happens before that point is reached.

From Hindsight to Foresight

Post-mortems are useful.

They tell us what went wrong.

They identify poor lending decisions, insufficient capital, weak profitability, excessive concentration, ownership problems, governance deficiencies, liquidity pressures, compliance failures or other contributing factors.

But post-mortems occur after value has already been destroyed.

• Depositors may already be anxious;
• Employees may already have lost jobs;
• Shareholders may already have lost capital; and
• Borrowers may face disruption.

The regulator must then devote significant resources to liquidation, creditor claims, asset recovery and communication.

The institution’s reputation is already damaged. And, importantly, the reputation of the wider banking industry may suffer collateral damage even when the majority of institutions remain fundamentally sound.

Cambodia therefore needs to progressively move from a post-mortem banking culture to an early-warning banking culture.

The principle is simple:

 

The best banking crisis is the one that is identified and corrected before it becomes a crisis.

That means identifying deterioration when it is still manageable.

A bank rarely moves overnight from healthy to non-viable.

Usually there is a progression.

• Credit quality deteriorates.
• Provisioning increases.
• Profitability weakens.
• Capital generation slows.
• Liquidity becomes tighter.
• Deposits become more expensive.
• Management becomes increasingly defensive.
• Problems are restructured rather than resolved.
• Senior employees leave.
• Related-party exposures may become more significant.
• Regulatory breaches increase.
• Transparency can decline precisely when greater transparency is needed.
• Individually, one indicator may not mean very much.

Together, however, they can tell an important story.

This is precisely where:

• systematic benchmarking;
• independent research;
• stronger disclosure; and
• regulatory early-warning mechanisms become increasingly valuable.

Cambodia’s Second Warning Sign: NPLs

Bank closures are not the only issue requiring attention.

Cambodia’s gross non-performing loan ratio reached approximately 9.6% by June 2026, compared with 8.4% a year earlier.

Again, perspective is essential.

A gross NPL ratio of 9.6% does not mean 9.6% of Cambodia’s banking assets will ultimately be lost.

Provisioning, collateral, recoveries, restructuring and borrower rehabilitation all matter.

Nor does a rising sector-wide NPL ratio explain the circumstances surrounding each of the five institutions that have closed. The cases should not be incorrectly bundled together as though every closure resulted from bad loans.

Nevertheless, a rising NPL ratio is one of banking’s most important warning indicators.

Bad loans affect more than accounting.

• They consume management resources;
• They absorb capital;
• They require provisions;
• They reduce earnings;
• They can weaken appetite for new lending;
• They constrain banks’ ability to finance otherwise healthy businesses.

And if unresolved for too long, they can turn a temporary asset-quality problem into a structural balance-sheet problem.

AMRO has therefore specifically recommended that Cambodia accelerate NPL resolution while reinforcing bank capital buffers, improving liquidity oversight and strengthening its bank-resolution framework.

Encouragingly, Cambodia has already begun constructing some of the tools necessary to address this.

In February 2026, the NBC established a regulatory framework for Asset Management Institutions capable of acquiring and managing NPLs and associated collateral. In March, it also issued regulations relating to emergency liquidity assistance for deposit-taking banks and financial institutions.

These are important building blocks.

The next priority is making the entire framework work together.

 

Build a Cambodian Banking Early-Warning System

What might that look like?

SuperBankRatings’ believes Cambodia would benefit from an integrated Banking Resilience Early-Warning Framework capable of complementing confidential regulatory supervision with greater use of publicly observable financial, governance and institutional indicators.

Such a framework should not attempt to publicly predict bank failures.

Nor should an independent assessment be confused with the confidential prudential supervision performed by the NBC.

Instead, its purpose should be to identify direction of travel.

• Is a bank improving?;
• Is it deteriorating?;
• Are weaknesses temporary or becoming structural?;
• Is management addressing the problem?; and
• Does the institution have the financial strength and shareholder support necessary to absorb further stress?

SuperBankRatings’ existing methodology already examines banks across broader institutional factors including:

• corporate governance;
• external support;
• economic and industry risk;
• financial health and performance;
• funding and liquidity;
• management quality;
• market position;
• regulatory environment;
• risk management;
• sustainability; and
• technology innovation.

Applied as an early-warning mechanism, these indicators can become much more than a ranking methodology.

They can become a bank-health diagnostic framework.

The key should be identifying not merely today’s number, but the three-year trend and the interaction between different numbers.

• A bank reporting falling profitability may not necessarily present a problem.
• A bank reporting falling profitability, deteriorating NPLs, weaker liquidity, declining deposits, increasing funding costs and reducing capital buffers at the same time deserves considerably more attention.

That is the difference between: analysing individual statistics and assessing institutional resilience.

Capital Must Be a Buffer, Not Merely a Minimum

Capital is banking’s principal shock absorber. Meeting a regulatory minimum is essential.

But resilience means having enough capacity to remain sound after something goes wrong.

Cambodia should therefore increasingly focus not simply on whether institutions meet required capital ratios today, but whether they would continue meeting them after credible stress.

• What happens if property values fall another 20%?;
• What happens if NPLs increase substantially?;
• What happens if significant borrowers default simultaneously?;
• What happens if deposits leave faster than expected?;
• What happens if a major shareholder can no longer provide financial support?;
• What happens if a bank becomes subject to an international sanction, cyber incident or reputational shock?

A strong bank should be able to answer those questions before the event occurs. The strongest boards should already be asking them.

For banks displaying higher risk characteristics, supervisory expectations could increasingly require larger buffers above minimum regulatory capital, more frequent stress testing and credible capital-restoration plans.

This is not punishment. It is prudent banking.

Liquidity: Confidence Can Move Faster Than Capital

A bank can report adequate capital and still experience severe problems if depositors suddenly demand their money.

That is why liquidity deserves equal prominence.

Modern banking operates at digital speed. Rumours once took days to spread. Today they can travel across Telegram, Facebook and messaging groups in minutes.

Mobile banking then allows customers to respond almost immediately. This changes liquidity management fundamentally.

Every Cambodian deposit-taking institution should therefore maintain rigorous contingency-funding plans capable of answering a simple question:

If confidence suddenly changes tomorrow morning, what happens next?

Banks should know the concentration of their largest depositors, understand how quickly funds could leave, maintain sufficient high-quality liquidity and establish clear escalation procedures before stress appears.

The NBC’s March 2026 emergency-liquidity framework is therefore another important part of Cambodia’s developing financial-stability architecture.

But emergency central-bank liquidity should remain an emergency mechanism. The first defence must always be the bank’s own prudent liquidity management.

  

The NPL Challenge Requires Resolution, Not Permanent Restructuring

Cambodia must also distinguish between helping viable borrowers through temporary difficulty and indefinitely postponing recognition of fundamentally impaired debt.

Restructuring has an important economic role.

A good business experiencing temporary cash-flow problems should not necessarily be forced into failure when a sensible restructuring could preserve jobs, productive capacity and the eventual repayment of the loan.

But restructuring must have an exit.

Otherwise, there is a danger that restructuring becomes postponement rather than recovery.

The development of regulated Asset Management Institutions offers Cambodia an opportunity to create specialist capability for purchasing, restructuring, managing and ultimately resolving distressed exposures. Over time, Cambodia could develop a deeper distressed-asset ecosystem involving banks, AMIs, investors, restructuring specialists, valuers, insolvency professionals and courts.

The goal should be straightforward:

• Recognise the problem early.
• Separate viable borrowers from non-viable exposures.
• Restructure what can genuinely recover.
• Resolve what cannot.

And then return capital to productive lending.

That is how an NPL problem stops becoming a permanent drag on the banking sector.

 

Governance Must Be Monitored Continuously

Financial numbers generally tell us what happened.

Governance often tells us why.

Banking institutions are unusual companies because they operate substantially with other people’s money.

That makes ownership, board quality, senior management, internal controls, risk culture and transparency central to financial stability.

Fit-and-proper assessment should therefore never be viewed as a one-time licensing exercise.

• Ownership structures evolve;
• Directors change;
• Business relationships change;
• Risk appetites change;
• International sanctions change;
• Reputational risks change;
• Governance surveillance must consequently be continuous;
• Boards should be able to demonstrate independence and appropriate expertise;
• Risk committees should challenge management rather than merely endorse it;
• Internal audit should be genuinely independent;
• Related-party exposures require particular scrutiny;
• Shareholders should demonstrate not only the financial capacity to support their institution, but the integrity and transparency expected of owners of deposit-taking institutions; and
• The cost of weak governance in banking is rarely confined to shareholders.

 That is why governance must remain one of the strongest pillars of Cambodia’s next banking-development phase.

 

Transparency Builds Informed Confidence

There is another mechanism Cambodia should strengthen: public transparency.

Confidence should never depend on customers simply being told that everything is fine.

The strongest confidence is confidence supported by evidence.

Cambodian banks increasingly publish detailed annual reports, audited financial statements and regulatory disclosures.

But comparability remains difficult for ordinary customers:

• Financial statements are complicated;
• Capital ratios can be difficult to interpret;
• NPL definitions require understanding;
• Liquidity information may be spread across multiple pages;
• Governance disclosures vary considerably; and
• Most depositors understandably do not have the time or expertise to analyse hundreds of pages of bank reports.

This is where independent research and comparative benchmarking can assist.

The purpose should not be to replace regulators, auditors or credit rating agencies.

Each has a different role.

Independent bank benchmarking can instead convert complicated information into accessible comparative indicators highlighting strengths, weaknesses and trends so that customers, businesses, investors and other stakeholders can make more informed decisions.

That creates market discipline.

Banks demonstrating stronger governance, capital, liquidity, risk management and transparency should receive recognition for doing so.

Banks with weaker indicators should have an incentive to improve.

This is how benchmarking becomes part of the solution rather than simply another ranking exercise.

Responsible Banking Must Become Measurable

The phrase “responsible banking” is easy to support.

The challenge is determining what responsible banking looks like in practice.

It should be measurable through outcomes:

• Did the bank maintain credit discipline during periods of rapid economic growth?;
• Did its NPL ratio remain manageable across the cycle?;
• Did it provision adequately?;
• Did it maintain sufficient capital?;
• Did it preserve liquidity?;
• Did management react when warning indicators deteriorated?;
• Did shareholders provide support when required?;
• Did directors challenge excessive growth?;
• Did the bank communicate transparently?;
• Did it treat depositors fairly?; and
• Did it strengthen its systems after identifying weaknesses?;

Those are not theoretical questions.

They distinguish genuinely resilient institutions from institutions that merely look strong during favourable economic conditions.

 

Responsible banking therefore requires measurable responsibility.

Deposit Protection Should Remain Part of the Roadmap

Cambodia should also continue progressing toward a formal deposit-protection framework.

AMRO has repeatedly identified deposit protection, bank resolution and crisis-management frameworks as important components of Cambodia’s evolving financial safety net.

A well-designed deposit-protection system does not eliminate banking risk. Nor should it encourage customers or institutions to ignore risk.

Instead, it can protect smaller depositors, reduce the incentive for panic withdrawals and provide greater clarity regarding what happens when a financial institution fails.

• Design matters;
• Coverage limits matter;
• Funding matters;
• Governance matters; and
• Moral hazard must be controlled.

But as Cambodia’s financial system approaches US$100 billion in assets and digital banking enables deposits to move instantly, the case for strengthening the formal financial safety net becomes increasingly compelling.

Give Regulators Credit for Acting

There is another important perspective that should not be lost.

NBC should be applauded and given the highest credit by Cambodia for its swift and efficient actions against institutions no longer suitable for the regulated banking system

Closing a bank is rarely easy.

• It creates operational complexity;
• It creates public concern;
• It creates legal and financial consequences;
• It can attract criticism regardless of whether a regulator acts too quickly or too slowly;

Removing weaker institutions while they remain small strengthens protection rather than weaken financial stability.

The longer-term objective, however, should be even better:

Identify deterioration early enough that an institution can recapitalise, restructure, merge, change ownership or correct its deficiencies before liquidation becomes necessary.

Resolution should be available.

Prevention should be preferable.

Risk is inherent in banking.

The objective is therefore not zero risk, zero NPLs and zero bank failures.

The objective is:

• fewer surprises;
• earlier intervention;
• stronger institutions;
• faster NPL resolution;
• better depositor protection; and
• better-informed stakeholders.

That is a realistic definition of resilience.

  

From a US$100 Billion Banking System to a Better Banking System

Cambodia’s banking industry has already demonstrated that it can grow.

The next challenge is demonstrating that the institutional architecture surrounding that growth can become equally sophisticated.

The sector now has an opportunity to turn recent events into an important reform moment.

Five commercial-bank closures should not define Cambodian banking. They should help improve it.

Rising NPLs should not be treated as evidence that the country’s financial system is destined for crisis.

• They should encourage faster recognition, stronger provisioning, better workouts and more disciplined future lending;
• International scrutiny should not cause Cambodia to retreat from global financial integration;
• It should accelerate improvements in governance, AML controls, ownership transparency and institutional credibility;
• And increased depositor concern should not be answered simply with reassurance; and
• It should be answered with evidence, transparency and stronger protection mechanisms.

Cambodia has spent decades building its banking system.

The next decade should be about strengthening its quality.

The transition therefore needs to be:

• from growth to resilience;
• from reaction to anticipation;
• from restructuring to resolution;
• from minimum capital to genuine capital buffers;
• from confidence based on reassurance to confidence supported by evidence; and ultimately,
• from hindsight to foresight.

That is how Cambodia can ensure that today’s warning signs become the foundations of tomorrow’s stronger banking system.

Because the most successful banking regulator is not simply the one capable of closing a troubled bank. The most successful banking system is one capable of identifying vulnerabilities early enough that fewer banks ever need to reach that point.

And the most credible banks will increasingly be those able to demonstrate not merely declare that they are financially strong, responsibly governed, adequately capitalised, liquid, transparent and prepared for the next shock.

 

Cambodia does not need another post-mortem.

It needs an early-warning culture.

Responsible banking must be measurable.

And the time to build that system is not after the next banking problem emerges.

It is now!