Foreign banks with local offices eligible to bid for licences
Only the 42 foreign banks with a presence in Myanmar will be eligible to apply for licenses for limited services, said a Central Bank of Myanmar official.
May Toe Win, director at the Central Bank’s Financial Insti-tutions 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.”
