22 March 2016
Four New Foreign Banks Granted Preliminary Licenses to Operate in Myanmar
Four new foreign banks have been granted preliminary licences to participate in Myanmar’s banking services. These banks are:
- State Bank of India
- Bank for Investment and Development of Vietnam
- E. SUN Commercial Bank (Taiwan)
- Shinhan Bank (Korea)
The announcement was made by the Central Bank of Myanmar (CBM) on 4 March 2016. As per CBM’s terms, the four banks are each required to invest at least US$75 million of capital and have 12 months to fulfil business commitments outlined in their initial applications. They should also take all necessary measures to ensure functional banking operations from day one of business.
While operating licences allow foreign banks to provide credit to local banks and financial institutions as well as foreign companies, they do not permit them to participate in retail banking operations or engage in direct lending in local currency. Foreign banks’ operations are also limited to only one branch per bank.
The move to grant preliminary operating licences is indicative of further liberalisation of the country’s financial services industry and follows on from when similar licences were issued to nine overseas banks in October 2014. These nine banks, which have since begun operations in Myanmar , are:
- The Bank of Tokyo-Mitsubishi UFJ (Japan)
- Oversea-Chinese Banking Corporation Ltd (Singapore)
- Sumitomo Mitsui Banking Corporation (Japan)
- United Overseas Bank Limited (Singapore)
- Bangkok Bank Public Company Limited (Thailand)
- Industrial and Commercial Bank of China
- Malayan Banking Berhad – Maybank (Malaysia)
- Mizuho Bank Limited (Japan)
- Australia and New Zealand Banking Group Limited (Australia)
The latest move to grant preliminary operating licences to four more banks indicates the potential for other overseas financial institutions, including Hong Kong based banks, to explore opportunities to enter the country’s financial services industry in the near future. More significantly, the presence of foreign banks will enable foreign companies to gain access to onshore loans. According to the World Bank, “the lack of access to finance is the most frequently identified obstacle to doing business in Myanmar”. As the country opens up its economy, and with the recent establishment of the ASEAN Economic Community (AEC), there is an increasing need for further transformation of the country’s financial system. The entry of foreign banks will therefore not only spur increased capital flows into the country but also lead to the modernisation of Myanmar’s financial infrastructure, both crucial for the country’s continued economic growth and its larger integration into the regional ASEAN economy.