Wed 19 Feb 2014
Filed under: Business / Trade,News
The Central Bank of Myanmar (CBM) will likely name the first group of foreign banks to be given independent operating licences by July as they prepare to bring in financing experts to narrow down the selection, a Central Bank official said.
A deputy governor of the Bank, who requested not to be named as they ar e not authorized to speak to the media, told Myanmar Times on February 18 that they will choose no less than five banks, but only after hiring a team of foreign consultants to help them decide, which should be offered the coveted licences.
“We are now still in stage of hiring foreign consultants and after that we will go on to the selection process together,” said the CBM official, adding that they will call for consulting proposals next month, while the process of selecting foreign banks will take about three months.
Banking officials had previously intended to allow foreign players in the market through a tiered plan that entailed allowing them to only be able to sign joint-venture deals with local banks this year, before opening the market completely in 2015.
Experts have said that foreign banks would have likely waited out the market and run their businesses independently next year rather than engage in risky joint ventures in 2014.
At the end of last year, the Central Bank reneged on its original plan and told the media that it would permit between 5 and 10 banks to enter the market as wholly foreign owned entities this year.
Local bankers have said that opening the market too early would result in many local banks being forced out of business in the face of modern services that would be offered from foreign banks.
“We have to permit foreign banks and, actually, we would like to grant license to all foreign banks, but the local banks fear of that process, so only a limited numbers of foreign banks will be allowed in the beginning,” said the CBM official.
The International Monetary Fund (IMF) last year has said allowing foreign banks into the market is an important part of developing the financial sector, but urged Myanmar not rush its decision.
The Central Bank is collaborating with several international finance institutions to modernise regulatory framework in the banking sector, while making improvements to its capacity to supervise it with new technologies, though some experts worry that the current laws would need to be updated in order to uphold modern banking practices.
“We are now finalizing updates to the old financial institution law, but we can permit foreign banks into the country with current financial institution law,” the Central Bank official said.
Other experts, meanwhile, heralded the government’s decision to allow foreign players into the market.
“We are aware that the government is assessing the viability of different foreign banking operation models for Myanmar. We consider this a positive development as the Myanmar government has demonstrated a keen desire to develop sound economic policies and financial reforms,” said Tina Singhsacha, Chief Representative of Standard Chartered Bank Myanmar.
“It is clear that the authorities have made it a priority to improve the local financial services sector so that the country can quickly draw level with other ASEAN economies.”
A total of 35 international banks have representative offices in Myanmar.