Foreign banks with local office eligible to bid for licenses

May Toe Win, director at the Central Bank’s Financial Institutions Regulation & Anti-money Laundering Department, said that five to 10 restricted licences will be awarded to foreign banks later this year. 

“Licensees are expected to contribute to the development of the domestic banking sector by letting foreign banks participate in interbank market. They will not be allowed to do retail banking. They are allowed to offer restricted services such as lending to foreign companies and corporates,” said May Toe Win, who is also the secretary of the licensing committee.

“Each bank will be allowed to open only one branch while local banks can operate many branches throughout the country. As a result of this, foreign banks cannot compete with local banks which already have a strong network across the country.”

She said that only the 42 banks that already opened representative offices in Myanmar will be allowed to submit expressions of interest to win the restricted banking licences. Based on the World Bank’s recommendation, a minimum paid-in capital of US$75 million will be required by the selected foreign banks.

Reuters recently quoted an anonymous source as saying that the central bank may issue the licenses by the end of September. All foreign banks are now allowed only to open representative offices. Foreign direct investment has risen since the economy reopened in 2012, but the lack of banking services deters many foreign companies. 

Most local banks are alarmed by the plan, however. Although they foresee benefits associated with foreign banks’ entry particularly in terms of technology and knowledge, they realise that there are a number of disadvantages.

 “In my own opinion, it is too early. We are not ready yet. We have 24 (local) banks but only four banks can apply the high-tech banking system. We need to take national interest into serious consideration,” said Thein Tun, chairman of Myanmar Banks Association. 

“They [foreign banks] are well-prepared, and have branches and representative offices all over the world. We should make the move slowly and steadily to protect local banks.”

In response to local banks’ concerns, May Toe Win said, “In our consultations with foreign banks’ representatives, we have learnt that they don’t want to compete with local banks. They just want to offer services to their foreign customers. They are also pleased with restricted banking licenses as they have already acquired similar experience in other countries.”

The selected foreign banks will be allowed to offer their services one year after getting the licenses, when the Financial Institutions Law is supposed to be enacted. Before the law is enacted, the central bank expects to regulate foreign banks under existing laws, she said.

“There’s no plan to put in place different rules and regulations for local and foreign banks. They will be subjected to the same laws,” said May Toe Win who has been working for the central bank for more than two decades.

Than Win Swe, chief executive officer at the United Amara Bank, said that it is not fair for local banks to follow the same rules and regulations.

“At the present, we are at the zero level. So there will be many difficulties if the Central Bank sets the same rules and regulations for us. We don’t have comprehensive prudential guidelines yet,” said Than Win Swe, adding that prudential guidelines need to be approved as soon as possible. 

He also questioned the role of Roland Berger Strategy Consultants, a German consulting firm that will oversee the process. The firm also oversaw the country’s telecom operator evaluation and selection process, in which Telenor and Ooredoo won the licences to operate in Myanmar’s under developed telecom sector.

“It looks like awarding our financial power to a consulting firm. We need to consider how much contribution it will provide to private banks, and to which extent it contributes to the Central Bank,” said Than Win Swe.

“In the selection process, the licensing committee may review the firm’s selection. As we cannot know exactly about it, we want the Central Bank to be transparent in the selection process.”

MOB’s Mya Than shared the similar view, regarding Roland Berger’s role.

“To be honest, I really don’t understand why the central bank lets a foreign consulting company overview the process. Does it mean that the Central Bank doesn’t want to take any responsibility if there is something wrong with the process? Many people are asking questions like that.”