Foreign banks given green light to return to Myanmar

In a bid to increase foreign investment and accelerate the drive to liberalise its banking sector, the Central Bank of Myanmar today announced that nine foreign lenders had been given licences to operate in the country.

The long-anticipated move is being hailed as another promising sign that the former pariah state is serious about integrating its economy globally.

"Taking into consideration where the banking industry of the country stands right now, even the current partial opening of the sector to international banks is a major development," Sardor Koshnazarov, managing director at Silk Road Finance, a frontier-market-focused investment firm, told the Wall Street Journal.

“After due consideration, the Licensing Committee has decided to grant preliminary approval to prepare for commencement of banking operations in Myanmar to nine foreign banks,” a statement from the central bank said. The preliminary licences give them one year to set up a single branch in what analysts have described as the region’s fastest-growing economy, as well as one of its riskiest.

Three licences went to Japanese lenders – Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group – underscoring the interest in Myanmar by that country’s government and corporations.

The licences went to Singapore’s United Overseas Bank and Oversea-Chinese Banking Corporation, Industrial and Commercial Bank of China, Thailand’s Bangkok Bank, Maybank of Malaysia and Australia’s ANZ.

Each must bring in a minimum US$75m of capital. They are also restricted to a single branch as well as corporate and wholesale banking. The cannot engage in retail banking, and are also restricted to lending to foreign investors in foreign currencies, not the local currency, the kyat. The banks can only lend in kyat through partnerships with a local bank, a move aimed to protect the fledgling domestic industry, analysts said.

No Eurpopean or US lenders had applied for licenses.UK-based Standard Chartered, which has a representative office in the country, did not apply for a licence, citing “commercial” reasons.  

Mitsubishi said it was “delighted”, telling the Financial Times that it would open a branch after April, and that it had not ruled out forming a joint venture with a local bank. ANZ said it expected to start operations under the new licence in June, focusing on trans-Asian trade and investment flows, according to the Financial Times.

“Given its size, economic potential and its strategic position between China and India, Myanmar is forecast to be one of the fastest growing economies in the region over the medium term,” Andrew Géczy, ANZ’s chief executive for international and institutional banking, told the paper.

The central bank said the licences were valid for one year. “The preliminary approval is valid for 12 months during which the successful Applicants will have to fulfil the commitments … take all necessary measures to ensure functional banking operation from day one of business and will have to comply with requirements laid down by the Central Bank of Myanmar,” it said in the statement. “Upon fulfillment of the above-stated, the Central Bank of Myanmar will grant the final License to operate in Myanmar,” it added.

Banks given licences

  Australia and New Zealand Banking Group Limited (ANZ)

  Bangkok Bank

  Bank of Tokyo-Mitsubishi UFJ

 Industrial and Commercial Bank of China (ICBC)

  Malayan Banking Berhad (Maybank)

  Mizuho Bank

  Oversea-Chinese Banking Corporation (OCBC)

  Sumitomo Mitsui Banking Corporation (SMBC)

  United Overseas Bank (UOB)