Central Bank Talks Up Stability amid Economic Challenges
By Kyaw Hsu Mon 18 August 2015
RANGOON — The Central Bank of Myanmar pledged Tuesday to assist private banks that may run into financial difficulties, looking to address recent speculation that some financial institutions were heading for a crash due in part to the recent depreciation of the kyat.
Central Bank officials held a meeting with representatives from several private banks on Monday before declaring in a statement Tuesday that reports of the latter’s collective slide, including Kanbawza (KBZ) Bank and the Tay Za-founded Asia Green Development (AGD) Bank, were baseless.
Sett Aung, deputy governor of the Central Bank, told the state run Myanma Alin newspaper on Tuesday that the Central Bank would provide financial support to private banks that faced serious difficulties, according to regulations.
“All private banks are working as normal and following the rules of the Central Bank,” he was quoted as saying. “We discussed on Monday that the value of the Myanmar kyat is stable at the moment.”
Last week’s dramatic ouster of ruling party chairman Shwe Mann not only sent shockwaves through political circles, but also triggered concerns over concomitant economy instability, industry sources said.
Nyo Myint, senior managing director of KBZ Group of Companies, told The Irrawaddy that the firm had received enquiries from regular clients requesting advice, including on whether they should withdraw their savings, apparently responding to rumored financial strain on top private banks.
“Some withdrew money but only small amounts. Even if all customers wanted to withdraw their money, we could manage it because we have other businesses to support the bank. But as you know, these were just rumors,” Nyo Myint said.
“Even if some private banks endure a financial crisis, the Central Bank has back-up money, so cases of bankruptcy will not happen like in 2003,” Nyo Myint said, adding that rumors were spread by groups who wanted to take advantage of the recent shakeup of Burma’s ruling party.
Chit Khine, chairman of Myanmar Apex Bank, said that since general awareness of Burma’s banking sector was lacking, falsehoods were more likely to take hold.
“People believe whatever rumors come out… because of their [low] knowledge of the banking system. The Central Bank is always behind private banks, that’s why they don’t need to worry,” he said.
Chit Khine cited uncertainty within Union Solidarity and Development Party ranks, coupled with Burma’s weak currency, as giving weight to recent speculation over the state of private banks.
Severe flooding across much of Burma is also expected to hit the local economy, giving traders further cause for unease, with the country’s agricultural export revenues likely to see a massive drop as authorities impose export controls on much-needed supplies of rice and other staple crops.
The value of the Burmese kyat against the US dollar remains weak after a steady slide since May. To address growing demand for the dollar, the Central Bank has attempted to lessen reliance on black market currency trading by selling US dollars to private exchange counters.
Dollars, “must be sold to importers, who are the clients of banks,” Sett Aung told Myanma Alin. “We require [private] banks to sell 80 percent of dollars that they have bought from our Central Bank to importers. If they don’t, we won’t sell them dollars [again].”
Sett Aung also insisted the country’s monetary situation was equally impacted by external factors.
“The fluctuations in dollar value on the international market coincide with what has happened in our country. In my view, it may be related to the devaluation of the Chinese Yuan,” he said.