Myanmar’s Central Bank has awarded “preliminary approval” for nine foreign banks to operate in the country, signaling its intentions to open up its long closed economy, and connect with the rest of the the world.
A total of 25 foreign banks applied for the licenses, and the Central Bank of Myanmar recently approved nine lenders, which all are from the Asia-Pacific region.
“After due consideration, the Licensing Committee has decided to grant preliminary approval to prepare for commencement of banking operations in Myanmar to nine foreign banks,” a statement from the central bank said.
These include Australia and New Zealand Banking Group (ANZ), Industrial and Commercial Bank of China (ICBC), Thailand’s Bangkok Bank, Malaysian Banking Berhad (Maybank), and Singapore’s Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB).
The other three are Japan’s banks: Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation (SMBC) and Mizuho Bank.
European and US lenders had stayed out of the process.
According to the Central Bank of Myanmar, the preliminary approval is valid for 12 months, following which they would be final license to operate the business in Myanmar.
Myanmar’s government, which replaced a military regime in 2011, is trying to modernize the country’s creaking banking system and boost capital flows to local businesses after decades of economically-ruinous junta rule.
Central bank vice-governor Set Aung said that told parliament in June that foreign banks would be subject to a range of restrictions to protect the interests of local lenders. Foreign banks will be limited to one branch, won’t be permitted to operate a retail-banking business, and will be allowed to lend only in foreign exchange, and not in the local currency, the kyat, he said.
Local banks expressed their concern over giving the licenses to the foreign banks since most of them are small banks and lack competitiveness. They are also worried that their staff will be poached by foreign lenders with deep pockets.
Local people do not trust the banking system and prefer keeping money at home and run the business by cash. This will be a challenge for the banks, said Chartsiri Sophonpanich, President and Director of Bangkok Bank. “Myanmar has plenty of natural resources and it has a significant change in both politics and economy. I do believe that its future is going to flourish,” he added.
In the past, all the banks under the military’s control had tumbled down together with the country’s economy because of the management and the belief in black magic. Once, they were forced to issue the Kyat banknotes containing number 9, which was believed to be the lucky number. In 2003, three banks went bankrupted after the country faced the financial crisis and the boycott from the United States.