IMF urges 'solid authority' ahead of foreign bank entry
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The banking supervisory framework should be strengthened ahead of liberalisation in the banking sector to let in foreign banks, said an official of the International Monetary Fund.
In an interview, IMF’s Deputy Managing Director Naoyuki Shinohara noted that foreign banks’ presence will benefit the country, given their certain skills and expertise.
“That will be beneficial in making the financial market in this country more sophisticated and more effective. At the same time, if you allow too many institutions to come in, you must have strong and solid supervisory authority,” said Shinohara.
The IMF has been assisting Myanmar on financial liberalisation. In a recent report, the Myanmar authorities confirmed that the Banking and Financial Institutions Law will be introduced in 2014.
At present, the industry is operated by four state-owned banks and 19 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.
Shinohara noted that a strong famework is necessary to contain possible risks. The authorities should strike a balance between existing and new players. One of the important areas (that) the authorities need to think is the ‘supervisory function’ of the Central Bank of Myanmar and individual banking activities.
“We cannot deny the certain impacts (to be brought about by newcomers). That is a natural process for the development of an economy. Economy develops as new investments come in. That makes the industry more efficient and more productive,” he said.
Finance Minister Win Shein told Myanmar Eleven that foreign banks are very eager to participate in the country’s banking industry.
“We always think about that. We want to improve our banking conditions. On the other hand, we would like to improve our local banks. There are two sides. So we have to consider how to allow foreign banks to participate in our banking sector. It is very critical,” said Win Shein.
The minister stated that the government is trying to improve rules and regulations so that all the institutions develop.
He emphasised the importance of the enactment of the Banking and Financial Institutions Law which is now being considered by Parliament.
He added that only after the law is officially enacted, can authorities decide how to open the banking sector for foreign bank participation in the country.
“Until now, we cannot decide how many foreign banks can participate in our banking sector,” said Win Shein.
KPMG’s Managing Partner for Myanmar Yasuhide Fujii said in an earlier interview that in the initial period, a limited number of foreign banks should be allowed to open branches in the Southeast Asian country.
