Foreign bank licenses expected this year

 

Confirming this is the International Monetary Fund (IMF)’s country report, which said that the Banking and Financial Institutions Law will be introduced in 2014. 

“A new Banking and Financial Institutions Law to modernise the prudential framework is in the final stage of drafting. At the same time, preparations are being made for the entry of foreign banks, and options are being considered for the reform of state banks,” the IMF said in the second review report.

The law will pave way for further liberalisation in the financial sector that includes the long-awaited issuance of licenses to foreign banks.

 “The authorities place high priority on international integration, and are moving rapidly to issue licenses to foreign banks, while avoiding the creation of parallel joint-venture banks,” said the report which was released last week, following the second review under the staff-monitored programme (SMP).

Drafting of regulations is underway with the IMF’s help. As a preparation for the modernisation, private banks have been allowed to offer limited foreign exchange services, for the exchange of three key currencies - US dollar, Singapore dollar and euro with Myanmar Kyat - at daily designated exchange rate.

At present, the banking industry is operated by four state-owned banks and nineteen privately-held banks. No foreign banks have been allowed to operate in the country except to open representative offices. At present, there are 35 foreign banks’ representative offices in the country, including the Export-Import Bank of Korea which just started the operations in this year.

It was believed that foreign banks could also help jump start economic development by providing access to much-needed financing for corporate clients. They will also introduce new kind of competition to the industry. 

Zaw Lin Htut, deputy manager of Myanmar's biggest private bank, Kanbawza Bank, told Reuters recently that the liberalisation was welcomed.

"Foreign clients need funding and it's not a small amount to invest in Myanmar. As domestic banks, we cannot fund too many corporate customers. Corporate clients need local banks as well. I'm sure we can work together in the future," he said. 

He added that domestic banks would benefit by learning about corporate investment from the international banks.

All foreign banks have been patiently awaiting for the liberalisation in the banking industry. From all foreign banks with presence in Myanmar now, DBS is the most patient. Its representative office, commencing services in 1994, is the oldest in the country. 

Yet, during her visit to Myanmar in December 2013, IMF managing director Christine Lagarde noted that the country should not rush into opening up its banking sector to international competition.

"It’s most suitable for Myanmar to use the ’no haste, no waste’ way for opening up its banking sector," she said.

“Myanmar must stabilise its banking system with strong monetary policy, directed by an independent central bank and a bank monitoring system with the help of IMF," Lagarde said.

According to the World Bank, domestic lending has again risen in excess of 50 per cent in the past year, down slightly from over 60 per cent the year before.