Local banks fret foreign players' entry
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A NUMBER of local bankers have voiced concerns over the Central Bank of Myanmar's plan to liberalise the banking industry this year.
Although they say they realise the need for international expertise to support economic expansion, they are fearful of new challenges from powerful rivals.
Thein Tun, chairman of Tun Foundation Bank – one of 24 local banks – urged authorities to take a comprehensive view of the entire sector before making a final decision.
“We were only allowed to conduct foreign banking business about two years ago. We cannot compete with foreign banks in terms of capital. For example, if foreign banks are allowed to enter, they may be based in downtown areas while we have to operate on the outskirts [due to high rents downtown],” he explained.
Mya Than, chairman of Myanmar Orient Bank, which was established in 1993, said local banks were still in the infancy stage compared to foreign banks.
“On the other hand, it is impossible for us to block their entry for a long time. It is time to open up our market,” Mya Than said. “There are many benefits of awarding the licenses to certain foreign banks. At least, it can help increase foreign direct investment. And their capital and networks will definitely help our sector grow.”
Than Lwin, senior consultant at KBZ Bank – the largest domestic bank with 166 branches across the country – said that Myanmar must accept foreign banks in the near future as the ASEAN Economic Community will be launched by 2015.
“But we need to consider if we are ready for that. To be honest, we are not ready yet, but we welcome the foreign banks’ entry,” he added.
The entry of foreign banks could help reduce the lack of skilled labour in the sector, he added.
“We don’t have enough skilled labour. Many banks in the country have to hire experts from other countries. I think foreign banks will help develop our capacity,” said Than Lwin, a former deputy governor at the Central Bank and Controller of Foreign Exchange.
“Moreover, we should try to get banking technology from foreign banks as we are far behind. For example, ATMs have been used in other countries for about 50 years. We began using them just one or two years ago.”
Capital is one of the main concerns of local banks. KBZ’s Than Lwin said, “Our bank’s capital is lower than US$100 million. So when some foreign banks ask me our capital, I usually mention it in Kyats because they will laugh at me if they know our capital in US dollars. Even a provisional bank in foreign countries usually has a capital of about $400-500 million.”
“On the other hand, they [foreign banks] won’t enter the country without any benefits. So, we should consider both sides. Before awarding the licences, the central bank needs to ensure that the entry will not have any negative impact on local banks,” said Than Lwin, adding that setting measures to protect local banks is essential.
Sein Maung, chairman of First Private Bank, said that foreign banks’ entry is unavoidable in response to an open market economy and the Asean Economic Community. He suggested the authorities first allow foreign banks to open subsidiaries instead of branches.
“If they are allowed to open subsidiaries, their capital can be easily controlled by the rules and regulations of the Central Bank, but it is more difficult to control full branches,” said Sein Maung, who is also the vice chairman of Myanmar Banks Association.
On May 12 this year, a foreign banks licensing committee was formed with eight members. Central Bank Governor Kyaw Kyaw Maung leads the committee, which also includes Deputy Minister for Finance Maung Maung Thein, Attorney-General Tun Tun Oo, and the central bank’s three vice governors and two directors.
Aung Thaung, chairman of the House of Representatives’ Banks and Monetary Development Committee, said that the licensing committee should be enlarged by enlisting banking experts and officials from such ministries as National Planning and Economic Development, and Commerce, as new members.
“Before we allow foreign banks to open their branches, we need to seek advice from experts and bankers. If the Central Bank makes the decision alone, this may lead to unfavourable problems and even political issues,” said Aung Thaung, adding that all-inclusive participation is needed to avoid misunderstanding.
“As far as I have learnt, the license committee did not involve any independent expert or any official from the Ministry of National Planning and Economic Development. There are many banking experts all over the country. Some of them are supposed to sit in the committee. But, they aren’t in it.”
“Making mistakes is easy, but it is very difficult to correct a wrong decision. So we need to prepare well before making a decision. If there is something wrong with that, criticism will definitely spread all over the world. So we want the Central Bank to take great care in this process,” said Aung Thaung.
“We should also learn how other countries such as Japan, Singapore, and China have overcome similar situation. But it doesn’t mean that we will directly copy what they did. We should allow the entry in compliance with our economy.”
However, Aung Thaung admitted that foreign bank’s entry would play a crucial role in the country’s economic growth while strengthening the banking and financial system.
“We should not block their way. We need to learn from international banks to improve our technical know-how.”
He said that what is vital is how to regulate foreign banks’ operations in the country.
“The central bank needs to find the ways to regulate them in consultation with banking experts. But, the banks also need to follow all the rules and regulations. This is also important to consider.”
