Executives at seven private banks, including Yoma, AYA and UAB, face administrative action for allowing their banks to exceed the limit on the amount of home mortgages they can lend set by the Central Bank of Myanmar in January 2019, the junta announced on Monday night on the website of its information ministry.
Executives at the seven banks deemed responsible for allowing them to exceed the central bank’s limit on home loans will be charged under Section 154 of the Financial Institutions Law, the statement said. It also said that officials at the central bank will be punished for failing to properly supervise the banks.
The central bank caps the total amount that domestic banks can lend for housing loans of more than three years in duration at 5 percent of the bank’s total lending portfolio. The cap was introduced by the central bank in 2019 when it allowed domestic banks to offer home mortgages of more than three years in length. The expansion of home mortgage types was made by the since-ousted civilian government to allow more people to own homes and give banks more lending flexibility.
Section 154 of the Financial Institutions Law gives the central bank the authority to impose fines or restrictions on domestic banks. The section also allows it to suspend or terminate any staff of a bank as well as its board of directors.
Yoma Bank is owned by tycoon Serge Pun. AYA bank is owned by prominent crony U Zaw Zaw and UAB bank is owned by Nay Aung, a son of Than Shwe regime minister Aung Thaung. The other four banks facing legal action are Myanmar Citizenship Bank, SME Development Bank, Myanmar Metro Bank, and Construction, Housing & Infrastructure Development Bank.
A banking expert in Yangon asked why banks with more money to lend, like KBZ and CB, were not on the list, suggesting links to junta kept them off the list.
Both KBZ and CB have close ties with the ruling generals. Military-owned Myawaddy and Inwa banks are also not on the list.
The banking expert said that the junta accused the banks of violating the lending cap simply to increase their profits.
He described the charges in the statement as “very controversial” and poorly timed. “These days banks face more risk than ever in lending any sort of loan. The aggressive way the regime is handling this issue is very harmful to the fragile financial sector,” he added.
The statement said the seven banks had exceeded the central bank’s 5 percent cap on lending for home loans by 0.39 to 16.34 percentage points.
Monday’s statement said that Yoma Bank’s total housing loans of more than three years in length was about 11 percentage points above the 5 percent cap. Myanmar Citizen Bank exceeded the cap by 8.94 percentage points and AYA Bank by 1.96 percentage points, the statement said.
SME Development Bank exceeded the cap by 1.01 percentage points, CBM by 5 percentage points, UAB by 3.38 percentage points, Myanmar Metro Bank by 0.39 percentage points, and Construction, Housing & Infrastructure Development Bank by 16.34 percentage points, the statement said.
A member of the board of directors at Construction, Housing & Infrastructure Development Bank said the issue was too sensitive to comment on. “At the moment, we are trying to address this issue. The situation is still very sensitive [so] I can’t comment on it,” he said.
