Cambodia’s banking sector in 2025 can best be described as stable with growing caution. Recent data show that banks remain strong and continue to enjoy public trust, even as lending slows and pressures on loan quality increase. This reflects that the sector is not in crisis, but it is no longer in a comfortable phase of fast expansion.
This situation is best understood using the CAMEL framework, which looks at Capital adequacy, Asset quality, Management, Earnings, and Liquidity. CAMEL is important because it focuses on sustainability and risk, not just growth or profits.
One of the clearest strengths of Cambodia’s banking sector is its strong financial buffers. In 2025, the capital adequacy ratio stood at 21.9%, well above regulatory requirements. At the same time, the liquidity ratio reached 177.3% for deposit-taking institutions.
These figures show that banks have enough capital to absorb losses and enough cash to meet customer withdrawals. From a risk perspective, this is a healthy sign. Capital and liquidity are doing their job as protection against uncertainty, not as tools for aggressive lending.
Importantly, banks are maintaining these strong buffers while slowing down credit growth. This suggests that banks are choosing prudence over pressure when making lending decisions.
Another important trend in 2025 is the gap between deposits and loans. Total banking assets increased by 9.5%, while deposits grew strongly by 14.7%. In contrast, credit growth slowed to just 4.1%.
This tells a clear story. People continue to trust banks and are placing more money into the system. However, banks are lending more carefully. Liquidity is not high because money is scarce, but because banks are cautious about new loans. This shift from fast expansion to careful selection is common when risks increase.
Despite strong buffers, asset quality has become the main concern. Non-performing loans (NPLs rose to 8.9%), showing that more borrowers are struggling to repay their loans. Banks have responded by setting aside provisions covering 67.5% of bad loans, which helps reduce immediate risk but does not fully remove it.
The rise in NPLs is linked to broader economic challenges, not only to bank behavior.
* First, border tensions and border closures have disrupted livelihoods in some areas. When people are displaced or businesses cannot operate normally, income falls and loan repayment becomes harder.
* Second, external factors, such as global geopolitical tensions and slower regional growth, affect trade, tourism, and investment. These pressures reduce cash flow for households and businesses.
* Third, the economic recovery has been uneven across sectors. Areas like real estate, construction, and small businesses continue to face difficulties, increasing repayment risks.
For these reasons, higher NPLs do not necessarily mean the banking system is weak. Instead, they reflect wider economic stress faced by borrowers.
Regulators have responded by strengthening risk-based and forward-looking supervision. In 2025, 55 banking and financial institutions were inspected on-site, showing close monitoring of emerging risks.
Overall, Cambodia’s banking sector remains defensively healthy. Capital and liquidity are strong, public trust is intact, and supervision is tightening. However, rising NPLs and slower lending show that risks remain uneven. The sector’s long-term health will depend less on growth and more on discipline, risk management, and careful supervision. This is not a crisis, but a sign that the banking system is entering a more mature and cautious phase.